ES backtested its SMA10 overnight and is back in the red with a potential bearish 10/20 cross in the works.  The last one (in late October) fueled a swift 9% correction. Our downside targets remain unchanged.

continued for members…

ES has horizontal support at its SMA50 if/when the red TL from late October gives way.

The chart to watch today is VIX, which tested a TL from its recent highs yesterday.Note that it should get another crack at its SMA200. A break above it would also mean a breakout above the yellow TL from the Jan 17 lows. A reminder, VIX remains in a bullish (bearish for stocks) 10/20 cross.

If that happens, it opens up the other yellow TL from last January. RB is getting a bounce, but we remain bearish on both it and CL.

USDJPY is taking another run at 102.38, with much riding on a long-awaited reversal there. A failure to reverse opens up the former lows at 101.17 followed by 98.99… …and a whole lot of misery below that.EURUSD is bouncing again, though I’m still comfortable being short from 1.2309 on Dec 30.A failure to reverse here opens up the previous high at 1.2555.  DXY has gone essentially nowhere…yet.UPDATE:  9:57 AM

Oil and gas just popped on news of a deal amongst OPEC+ members to keep production cuts in place for another month.  While certainly supportive in the short-term, this doesn’t change the inflation calculus suggesting a substantial drop by March. Nor does it change the slumping demand picture due to a resurgence in lockdowns.

Remember that 50.22 had been our most recent upside target for CL.  If it tops out there, it brings the purple .618 up to the same level as the red .618 at 39.96. This would intersect with the rising white channel .236 line around Feb 18, and makes the lower target at the purple .786 at 37.17 at about the same time.

The new targets if 50.22 ends up being the new high…RB has yet to make a higher high.

UPDATE:  3:20 PM

Well, that was exciting. The CL/RB spike looks completely overdone to me. For those who didn’t get a chance to short a couple of weeks ago, this is another chance. Yes, there is the risk of war with Iran and further price hikes. But, we can be almost certain that it is fleeting.

If there’s a fly in the ointment, it’s that the rest of the market doesn’t appear ready quite yet to give up on the reflation trade.  A couple of potential paths lower for ES…