SPX came with an inch of our downside target yesterday before the meltup began.  Given the ramp job overnight, it’ll probably do — especially since VIX is in a prime position to keep the ramp alive.  The algos love it when a rising channel breaks down, and it’s almost certain to happen this morning.continued for members…

Today should be all about backtesting the broken red channel, potentially around the SMA10/50 up around 2449-2551. Though, it’ll be tougher as long as the dollar keeps slipping.UPDATE:  9:43 AM

If there’s going to be a pause in this meltup, this should be it.  VIX has reached its SMA200 and SPX has backtested the little white channel it broke out of and down from – twice in each direction.

CL is in a tricky place, today.  Having backtested the white midline, it dropped back through the .236 — but then made two higher highs and is up nicely this morning, popping through the SMA10 and 100 in support of SPX’s bounce.  It’s setting up a triangle, which can obviously break out or down.  If SPX is only meant to backtest, then we’ll look for it to fall to the 45.25 target in the next few days.  If SPX is meant to rejoin its rising channel, then we should see CL back up to the SMA200 at 49.42 fairly soon.The argument for a backtest to the red channel bottom/trend line remains pretty strong.  And, if SPX is limited to one, then the next downside target is the SMA200 or white 1.618 down around 2335.The ES chart features a much better formed channel which clearly shows the potential for a backtest, probably around the white .618 at 2460.71. Note that this would be the midline of the rising red channel dating back to late 2015.UPDATE:  12:03 PM

Another potential speed bump, here, as ES has reached its SMA10 and SMA50, and SPX its .500 Fib.  If it pushes through, SPX’s SMA50 is up ahead at 2449.53 and the SMA10 is at 2451.10.  Our initial target is at 2454.11 – the purple .500.

UPDATE:  3:45 PM

SPX has completed its backtest, could reverse any moment if it’s going to.  Of course, a dip by VIX to new lows (<11.25) would keep it going.  I suspect it will, as ES still has a ways to go to tag its backtest at 2460ish.  That would put SPX “past” a backtest, and would be quite simple to accomplish.  Having said that, VIX is hesitating at 11.35 — which means either it’s going to hold/reverse here or gap higher overnight.  Anyone’s guess, but I’d hesitate to hold long overnight. UPDATE:  3:58 PM

At the close…could still break either way depending on what the algos are fed overnight.  We’ll get API inventory data this afternoon, and housing data in the morning.  And, of course, Jackson Hole is on deck.