After a drop to our downside target Wednesday, we were rewarded with a rise to our bounce target on Thursday.  It was an ugly close, but one which left SPX right at tentative support.

It’s a good thing we have VIX to tell us whether or not stocks will be actively supported, today.  Is the rising white channel breaking down? continued for members…

For now, VIX’s dip has boosted futures very slightly into the green.  But the rising gray channel probably isn’t meant to hold — only to guide SPX higher until the rising purple channel bottom is high enough.

USDJPY has likely topped out, but is taking its time reversing.

ES is also indicating a lower low, but is waiting for channel support to get higher.Bottom line, there’s a pretty good chance that SPX’s gray channel will fold and we’ll get to explore thos lower targets.  I’d want to be short on any drop below yesterday’s close.  But, if VIX is able to hold below the white channel bottom, we’re probably headed higher.

UPDATE:  9:33 AM

VIX is popping, and SPX should drop.  I’d short here with tight stops.  Initial support is at the red .618 at 2430.13, followed by the purple channel botton at the red .707 (2426.72) or the gray .786 (2426.08.)I think the problem is that neither CL nor USDJPY is providing much upside guidance.  USDJPY has probably topped out, and is just bumping along.  While CL has likely bottomed, but can’t race higher as it has many times in the past — at least until the month is over.  Even then, it’ll have to be careful not to create problems with the July YoY comparison.  June is already a very negative comp.  The Fed will have plenty of justification in being more dovish based on the Jun CPI which will be released Jul 14.    But, unless CL drops quickly from our upside target, it’ll be under inflation pressure again for July.

Beginning in August, CL can put in a more solid bottom. But, all this is presupposing that they’ll continue to manipulate oil prices in order to support stocks.  That can always break down if USDJPY breaks (cheaper oil but cheaper yen and strong support for stocks via yen carry trade.) UPDATE:  10:32 AM

VIX just slipped below the channel bottom, meaning SPX is likely to push above the SMA10.  Although it might reverse at the SMA5 200, there’s the chance it won’t.  So, cover here if you don’t want to take the chance.  Otherwise, be prepared to ride it out. UPDATE:  10:35 AM

It should reverse here if it’s going to reverse at all.UPDATE:  11:15 AM

Better late than never.  Still has to make it back below the SMA5 200, but at least it didn’t run away to the upside. I believe it will continue to slide, as DXY is finally positioning itself for that slide we’ve been expecting.If CL manages to kick it up a notch (and, with a little help from VIX) the dollar weakness shouldn’t affect equities all that much.  But, I’ve added another downside target at 2422 — intersection of the gray .886, IH&S target and red channel bottom — just in case. UPDATE:  3:07 PPM

Pretty much back where we started, and it looks like there’s more downside to come — if VIX will only stop cratering.  Note that there is a small H&S Pattern which completes here.  SPX dropped through the red neckline earlier this morning, and then popped when it reached the yellow channel top.   In other words, they might draw a line here for the rest of the day or for good. UPDATE:  3:50 PM

Kind of a typical Friday, with plenty of selling pressure but VIX being pounded into the sand.  My sense is that durable goods will come in weak on Monday, the USD will tank, and we’ll get see SPX drop to 2426 or 2422.  But, as always, only hold short over the weekend if you can hedge or deal with the gap risk.