We’ve had a  nice run, of late, as SPX, CL, VIX and USDJPY have all tagged targets where expected.  As meltdowns go, this one has been very well behaved.  Even the bounce we anticipated on Friday played out as expected, with the capitulation waiting until the final hour or so or trading.

if SPX can remain below the SMA5 20, there’s a clear shot to 2415 at the bottom of the red channel.  Otherwise, we’ll get jerked around for the rest of the day with the promise/threat of a drop hanging over our heads for hours and hours.

Today should see the rest of that particular leg complete, though the target has moved just a bit.  And, as we noted on Aug 10 when we first laid out these targets, there is considerably more downside if this low doesn’t hold.

continued for members…

I believe you could short any place in between here and 2460 and be okay, but definitely re-short on any drop through this morning’s lows with a speed bump (at least) at 2446.26 and the ultimate goal of 2440.81. If it drops through 2440, the next support levels are way down at 2421.56, 2409.39 and 2335.34.

Note that ES’ SMA100 is sitting at 2411, which is about 2412 on SPX — a slight overshoot of the .886 and SPX’s SMA100 at 2417.13.  Something’s gotta give – either ES falls short of its or SPX overshoots its. Getting that strong a selloff will mean VIX heads up to at least its .886 and, more importantly, USDJPY and CL sell off.

CL tagged the rising white channel midline and has already backed off some.  Remember, we have one reasonable downside target well below current levels around 45.25 if the large rising white channel from 42.05 breaks down — which I think it will.  But, there are a couple of nearer ones if USDJPY is meant to take the lead today — which it well might. Look for CL to at last backtest the SMA10.  If it breaks below it, then it’s “game on.” We’ve had this 106.30 target for ages, and it makes sense if DXY is going to finally tag the next lower channel line as expected.  At this point, with inflation being as tepid as it has been, DXY might even test the white midline and 1.272 Fib at 88.682.  My only problem with that, however, is that it would require significant euro strength — and, I just don’t see the impetus at this point.  To my ears, the ECB’s hints at tapering/tightening sound just as hollow as the Fed’s.VIX’s .886 is on deck, with an overshoot a definite possibility if SPX is being stubborn.I have to jump on a conference call in a few minutes…will be back asap.

UPDATE:  10:25 AM

SPX testing the SMA5 10, with the SMA5 20 the next line of overhead resistance.

UPDATE:  11:24 AM

This bounce is in danger of getting away from us.  CL is tanking, but so is VIX (more so.) DXY and USDJPY have both slipped, but began bouncing in the 30 minutes leading up to the euro close.  If SPX doesn’t reverse here at the SMA5 50/100, I’d bail on the short position until it does. UPDATE:  11:55 AM

I would call this close enough for CL to bounce at the .236 channel line target if it’s going to.  A failure to bounce here means it’s likely to break below the recent 46.46 lows and shifts our focus to 45.25.UPDATE:  3:53 PM

Clearly, I chose a poor title for this post.  There has been no capitulation, other than on the part of VIX which has now backtested the rising channel from last week.  CL has more to go.  DXY and USDJPY have further to go.  But, what about VIX?  Will it collapse when SPX tags its SMA5 200 or will it bounce back, enabling the capitulation I had expected today.  We’ll see.  I would only hold short if you’re able to hedge or handle the gap risk. More after the close…