ES off about 12 points at this time, working towards backtesting a TL from last Wednesday.
This would mean giving up about half its meltup since then, with plenty of indicators still pointing toward additional downside — but, VIX continues to insert itself into the equation in a big way.
TNX has reached trend line support, minimizing that particular drama by having delayed the drop.
But, oil and gas still have a big drop ahead of them. And, virtually all of the bell cows we’ve been tracking these past few weeks (TLSA, FB, AMZN, DB, etc.) continue to look quite vulnerable.
Toss in the fact that the yield curve is making new lows. Can the market keep it together?
Our downside targets from Mar 28 [see: More Where That Came From] remain in force.
continued for members…
I have a breakfast this morning, so will return for commentary later. Here are the charts worth keeping an eye on.
UPDATE: 12:30 PM
ES and SPX are both currently off about 2.5%, dipping below their SMA200s and coming very close to our next downside targets at the .886s: 2560.72 and 2563.38 respectively.
VIX is holding things at that level by virtue of the fact that it has rebounded off the channel bottom. If it punches through, so long SMA200s.
Arguing for more downside are CL and RB. CL has backtested the white channel midline.
While RB is in the middle of nowhere, with nothing but the SMA20 as potential support between it and the white channel top at 1.90 and the 2017 range way down at 1.78-1.82.
As a reminder, if the SMA200 gives way, we have downside targets much, much lower.
As we discussed last week, the yellow channel placement is kinda hinky. But, the purple channel’s is solid. One thing they both agree on is 2430-2450, the purple midline and a potential yellow bottom. The C=A point is 2462.50. If that falls, then 2138 comes into view. Yes, it would be quite messy. But, it’s entirely legit.
The trick will be getting past the usual/potential support from VIX, USDJPY and CL/RB. First things first. Watch VIX. If it creeps up past 23.60 or so, SPX’s SMA200 could fall. As always, it’s good to remain vigilant. I’d plan on taking profits or hedging at the .886s. If it doesn’t bounce, it’s easy enough to re-short or lift the hedge.
I probably needn’t remind cash investors about the overnight risk if it closes below the SMA200. My gut, though, tells me we’ll find our way down to at least 2456 with an outside chance of 2138.
UPDATE: 1:47 PM
SPX and ES just tagged their .886s (ES within .03 — 2560.75 v 2560.72.) VIX has pushed above the channel bottom, at least for now. And, ZN is up against TL resistance. IF ES and SPX bounce here, it should be up to their SMA200s.
UPDATE: 5:00 PM
At the close…
