Charts I’m Watching: Dec 28, 2020

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ES edged slightly closer to our 3730.29 target at its 1.272 Fib extension overnight, this time coming within 3.79. Unless it reverses prior to the opening bell, this complicates things.continued for members...While ES has plenty of room to run up and tag that Fib and potentially reverse from it…

…an open at these levels would put SPX well above its own 1.272 Fib. While not a deal-killer from the bears’ perspective, it renders a nice neat reversal candle impossible. It wouldn’t be the first time. In fact, we’ve had plenty of reversals follow from seemingly benign new highs over the past few years. A few examples are shown below.

But, it certainly doesn’t help the bears’ case.

What would worry me more as a bear is the potential for SPX to top 3720.37 and then defend that new support. This sort of maneuver has been a thorn in the side for bears ever since the March lows.

VIX is arguing that equities have topped here – if it can bounce off this white channel bottom. It’s also a setup, of course, for a breakdown which would be net positive for stocks.The algo drivers seem somewhat ambivalent about reversals. CL could still slip higher to 50.22, though it’s just barely hanging on to its SMA10 at the moment – on a lower high. And, it has clearly backtested its purple channel bottom. And RB still looks downright bearish to me.

On the currency front, DXY is still bottom feeding. A strong bounce would not only hurt CL and RB, but would hurt stocks as well.

While USDJPY is readying itself for another drop… …and EURUSD for potentially another slight rally before some serious backtesting. GC and SI are both testing important resistance. The 2s10s is still lurking in a dangerous spot – a potential breakout above recent resistance – with the alternative being a breakdown. Either is bearish for stocks. I continue to expect the 10Y to break down.The question is whether or not the 2Y will fall faster. We have a large 2Y auction coming up this morning – the biggest of 2020.ZN’s rising red channel is still clinging to life with bearish implications for stocks if it holds. And, last, note that BTC has broken through the 1.272 Fib at 24165. The next upside resistance is way up at the Fibs at 29,890-30,108. Remember, the two previous tops indicate that we should see the next top around Thursday, Dec 31.I am going to take afternoons off this week and get the website completely caught up. I’m finally to the point, following my recent shoulder surgery, where I can consistently get 5 or even more hours of sleep per night. Along with the long weekend, this has given me considerably more energy.