Futures are up moderately this morning, bouncing 60 points from their midnight lows on a retreat in VIX. Note that it wasn’t a collapse – the usual response when a rally is resuming.

This lack of algo baiting occurred yesterday, too, when ES completed a Head & Shoulders Pattern and backtested it in a fashion that was reminiscent of the old days, when central bankers didn’t “fix” every little dip.

This highly unusual restraint suggests this dip shouldn’t be bought, but is the next stage of a scripted correction we warned about several weeks ago [see: Correction Watch.]

Our downside case remains intact, with an even more bearish Head & Shoulders Pattern up next.

continued for members…ES is slightly above a backtest of the white neckline. At these levels, SPX will be in the same boat on the open. We have boatloads of backtesting going on this morning. Gold and silver have been quite weak of late, but are threatening a bullish breakout of their falling channels. DXY continues its reversal off the red TL, only to backtest the white flag pattern it recently broke out of.This correlates with USDJPY’s TL reversal. Though there is some question as to whether the dashed red TL will hold or a backtest of the SMA200 is still in the cards. The bigger question is whether or not EURUSD will stop here at a backtest of the red channel top.A reminder of how significant this moment is for EURUSD… Oil and gas continue to go nowhere. Their failure to rally in support of stocks is enough to send a bearish signal. Last, TNX seems to be reversing off the top of the white flag pattern – early stages of a fear trade.More later…