Following Friday’s algo-inspired spike, futures have been settling gradually lower. Over the past several hours, though, ES has rallied back into the green.  VIX continues to drive much of the action, ramping overnight just to have a place from which to dive the following morning. With CL and RB consolidating and the dollar under pressure, will it be enough to keep the rally going?

continued for members…

The big picture shows how important the next moves are to the rally’s continuation. ES is sitting just below the SMA5 200, emphasizing the importance of the next move.SPX’s channels aren’t as convincing, so its important to stay cautious at this point.As such, it’s important to keep an eye on VIX, which still has a clear path to 41.71 and 45.73 even though it has dipped below the TL off the Jan highs. The currency picture shows EURUSD still likely to break out, and DXY likely to break down — which will not benefit stocks. USDJPY is a little muddled at this point.  It has yet to make a convincing recovery back out of the falling gray channel (yellow arrow.)  Recall it went well beyond a backtest last week.Oil and gas look overextended and should at least backtest the channels from which they broke out last week.  If it goes beyond a backtest (currently 47.40 for CL and 1.323 for RB), more fuel for the bears.

The 10Y is consolidating before the next leg down to 24.98, ideally in the next week or so.

As an aside, AAPL’s bounce hasn’t been very overwhelming yet. And, COMP is coming up on its first real test since bouncing just below our 6222 target on Dec 24.UPDATE:  1:20 PM

VIX is still melting down and CL/RB are still melting. USDJPY has failed to break down.  Thus, though DXY continues to be under pressure, SPX/ES continue to be nudged higher.

At this point, they have clearly broken above the channel midlines — meaning they should be in the clear unless they fall back below on a backtest.  Trailing stops are recommended as there are still a few warning signals.

The next upside targets remain the same: primarily moving averages and the necklines at 2618ish for both SPX and ES. Though DXY is seemingly rolling over, it could easily fall short of our .382 target at the rate that EURUSD is “breaking out.”  Another week or so at this rate and it’ll be a total non-event. The indices remain super-sensitive to VIX.  Note that AAPL is seemingly rolling over.