If you liked yesterday’s market action, you’re loving today so far. Like yesterday, the latest overnight ramp job has put ES well above its 200-DMA. Like yesterday, now we get to find out whether it will hold.

It didn’t yesterday. The white acceleration channel broke down at the close, taking ES and SPX back below critical support. But, today’s a new day. VIX tanked 9.3% overnight – but right to strong support. The algos aren’t quite sure where to go from here…

continued for members…

With a slew of important economic news coming out in the next couple of days, this action has taken on the tone of a pre-dump rally.  If ES can hold its SMA200, great.  More upside ahead. But, if not, there’s plenty of downside potential.

Note the plethora of resistance just overhead – most importantly the SMA200, of course, but also the yellow TL, the IH&S target, channel lines and Fibs.

The picture for SPX is quite similar.  We are at or very near a potentially important turning point.  Here’s the clearest indicator – the SMA200 and horizontal resistance.The messier version – showing the channel top, yellow TL, IH&S target, and Fibs.

Backing out a little……and, without the rising white channel.

VIX continues to drive most of the action, but it has run into support at the white channel line.  It would need to push on through in order for stocks to maintain their ascent.USDJPY has gotten in on the action……which has enabled NKD to tag its own SMA200.

The EURUSD has tested its own SMA200…

…allowing DXY to backtest the latest fan line from its recent highs. Still no SMA200 tag, though.

The 2s10s is slipping higher again.  Will this be the time it finally breaks out or down?

Oil and gas are sliding, with CL still struggling to get past the 2008 lows at 33.20. And, GC is backtesting its IH&S target and 2.618 again.The other indices we’re watching are still on the bubble. Resistance is holding…so far. Things to worry about over the balance of the week…

I have to jump on a call, will check back around 10:15.

UPDATE:  12:15 PM

Watching SPX/ES climb back to their SMA200s for a backtest. Given the news flow, we could easily see the market puke here…

• Gottlieb says vaccine won’t come till 2021
• Fauci says we’ll probably get another surge
• Things just officially blew up in Hong Kong:  https://www.washingtonpost.com/business/what-hong-kong-losing-its-special-status-would-mean/2020/05/27/1c8ae9c6-9ffe-11ea-be06-af5514ee0385_story.html

 

I need to be out of the office this afternoon. Watch out for a potential headfake orchestrated by VIX.  It still appears as though we are heading lower or will soon.I should be able to do a post mortem around 6pm.

GLTA.

UPDATE:  5:00 PM

Another V-shaped recovery got ES and SPX back above their SMA200s by the close. In fact, both reentered their broken channels and tagged their next upside targets. No surprise, but most of the action was via VIX – which couldn’t stay atop its SMA20.CL and RB were off nicely today, with CL landing back below its 2008 lows…

…and RB coming very close to tagging the red TL from the Mar 23 lows (.9831ish.) It’s currently just below its SMA10 (1.0063) so this is an important test.  Any drop below .98 opens up the SMA20 at .936.USDJPY managed to bounce when necessary, but didn’t contribute much.

EURUSD backed off its SMA200 though… This allowed DXY to avoid breaking down yet again.  One of these days, it’ll tag that SMA200…The 10Y came back and tagged the apex of its triangle. Do or die time for this benchmark bond… …even as the 2s10s fell back to the safety of 51 bps.I don’t see anything very different from this morning’s outlook except that DJI and RUT both pushed through their .618s and SMA100s — suggesting they’ll continue up to their SMA200s.  It’s at least short-term bullish. In the bears’ favor, NKD’s SMA200 held… and COMP didn’t manage a new high – meaning yesterday’s test of the .886 is still the presumed high.GLTA.