Plenty of big chart developments this morning, with many of our targets close at hand.  The biggest potential development is ES’ red channel breaking down – at least for the moment.

While this could be a garden variety V-shaped dip to 2803-2810, the run up in VIX (+11.7%) and continuing plunge in oil and gas (today should be the day) argue for more.Currencies are still on our radar, as EURUSD is nearing our 1.1281 target and DXY has broken out of a rising channel.On the Turkey front, the lira continues to strengthen — a deal in the works?

If so, it’s sure not being reflected in DB — now down 16% since reaching our last upside target.

continued for members…

After some wild machinations, DXY has broken out — at least for the moment.

Arguing against any more upside: gold.  It has reached triple support –the .618, yellow TL off the 2011 highs, and the red TL from 2010.  We’ve targeted 1173.60 since the yellow TL broke down in May and gray channel broke down in June.  I strongly suspect it will bounce here.As noted above, EURUSD should be close to a reversal.  And, USDJPY has retreated to a point of safety — back above the white channel top, with the SMA200 tag put off for at least another day.

With EIA data coming out this morning, today could be CL’s day to backtest its SMA200. The timing looks right for RB as well.The fly in the ointment for bearish bets on oil and gas is that ES’s red channel is in danger of going bye-bye.  Are TPTB ready to let it go, or will the algos swoop in yet again?

If ES drops through its previous low of 2820, there are several likely targets: the small yellow neckline at 2810, the .786 at 2803.71, and the larger yellow neckline at 2798.SPX is a little cleaner, with the two most likely targets being the .786 and white channel midline at 2800.07 and the red channel bottom way down at 2784ish.Keep a close eye on VIX, which is testing its SMA100 at 14.81 for the third time in a row.  If it breaks out, 16.66 and 17.63 are the next higher targets and ES will almost certainly lose 2820.UPDATE:  10:06 AM

First important test for ES and VIX. UPDATE:  10:32 AM

Big build in crude and a small draw in gasoline.  CL is about to reach our 64.64 target……but, RB is backing off — might need a little more time.

VIX just tagged 16.67 and ES bounced at 2805 — slightly above the .786 Fib.  SPX reached 2804.44.  If I’m right about CL and RB tagging their SMA200s, SPX and ES will probably get a little more downside to their .786 Fibs.  If not, it’ll be because VIX starts tumbling back to the bottom of the yellow channel at 11.65. Just a reminder: I’m assuming CL and RB will get a strong bounce at their SMA200s that will take over the job of propping up stocks while VIX tanks back below 11.65 and currencies reset (the EURUSD bounces and USDJPY tags its SMA200.)  After that, things get a little fuzzy.

If CL and RB don’t bounce at their SMA200s, things could get ugly in a hurry.  And, frankly, I don’t think they need to decline any further.  Simply by remaining in this range, they should be able to take the edge off CPI – enabling the FOMC to jettison plans for a December hike and, if the Turkey contagion gets any worse, possibly the September hike as well.

The problem is that even though gas futures have declined quite a bit, retail prices have not yet followed suit.  We’d need to see them dip to around 2.70-2.75 for this latest decline make a real difference.Don’t be surprised to see Jim Bullard all over the news before tomorrow’s open.