VIX toyed with important support all day yesterday, keeping equities in the dark as to the next steps.As a result, ES spent the entire day continuing to dip below its SMA10 and SMA20 — even closing below a nice little trend line off its earlier highs as VIX refused to dive below the all-important yellow channel bottom.

It was all for naught, however, as the usual ramp job stepped in around 1am.  It should allow SPX to tag yesterday’s 2470.58 target on the open.  After that, however, the picture gets a bit muddled.

continued for members…After a pretty dramatic overshoot, EURUSD has been steadily losing momentum.  Today’s announcement that Jackson Hole will not usher in an ECB taper (duh!) has sent the pair tumbling even further.  Will the Fed minutes change perceptions re recent dollar weakness?  The yen is certainly giving USD a boost.  We’re back to the least dirty shirt in the hamper argument. CL’s rise after a huge API draw, yesterday, was quite muted.  Focus seems to be on the lack of demand.  EIA data is due out at 10:30 this morning.

UPDATE:  9:33 AM

There’s the .618 tag, and VIX is rising slightly while CL falls.  I’ll assume this is a slight overshoot and look for a reversal here — at least to the .500 but more likely to the SMA5 200 or .382.The fly in the ointment is that, while VIX is rising, it is almost to its SMA5 200 — which could put a damper on any decline by SPX.  Tight stops are advised.

UPDATE:  9:50 AM

Pretty wild goings on with VIX this morning.  Not sure if this is a fat finger trade, or there’s some news out there that hasn’t hit stocks yet.  SPX is off maybe a point from its highs.  If VIX holds above its SMA200, it would certainly lend credence to our backtest scenario.UPDATE:  10:44 AM

CL is fading fast, but VIX is more than offsetting it.  I’d dump the short position here, but be ready to re-short if VIX bounces off the yellow channel bottom around 11.33. UPDATE:  11:15 AM

I believe this morning’s pop in VIX was supposed to accomplish more of a backtest.  Having failed, the charts are kind of a mess at the moment. It seems like we get these sorts of very inelegant moves every summer about this time.  I assume it’s because the junior manipulators are in charge while those with more experience at nuanced moves are in the Hamptons.

VIX eventually gave up and is moving ahead with the .618 breakout without the benefit of a backtest, especially now that CL’s rally is almost completely undone.

The big question is whether SPX can hold above the .618 even after CL drops all the way to our 46.47 target.  We should find out shortly, but odds are it would require VIX to drop through 11.33.

UPDATE:  11:25 AM

More indecision, here, as they’re trying to keep SPX on top of the .618.  CL is backing off its earlier drop, and VIX is backing off its threat of a bounce (both, so far.)  I suspect SPX will be allowed to drop to its SMA10 again as soon as the SMA5 200 arrives at that level.  But, frankly, this is a minor train wreck of market manipulation.  The engineer appears to be either drunk or asleep at the wheel.UPDATE:  12:54 PM

Looks like we’ll possibly get the SMA10 backtest as discussed above, probably when the SMA5 200 arrives at 2466.64.  VIX has bounced at the SMA100 and back above the yellow channel line.

UPDATE:  2:02 PM

There’s the SMA10 tag, or close enough anyway.  Given that VIX just reversed near the SMA200, I’ll assume this is at least an interim low.  I would say it’s a great place for a bounce, but the possibility remains of a dip to the .500 around 2:45pm since CL hasn’t yet bottomed out.

The .500 Fib (2464.32), which remains a possibility.UPDATE:  2:26 PM

Amateur hour continues, here, as SPX has fleshed out the gray channel and tagged the .500, but CL still hasn’t reached 46.47.  Should be safe shorting VIX and going long SPX, but CL should have a little further to go.  Obviously, tight stops are in order — if the gray channel breaks down the next support isn’t until 2458, followed by 2450. Note that USDJPY is falling off a cliff, here.