Stocks had a nice move yesterday, making new lows before VIX and USDJPY prompted a 20-pt bounce (many hours before WMT’s earnings were announced.)

In the process, we scored a nice win with VIX — which slightly exceeded our target (14.51 vs 14) before crashing back down — as well as with our short on RB.

The big question remains whether or not the H&S Pattern in ES/SPX will be allowed to play out. Is this just a bounce on the way lower, or yet another dashed correction?

SPX closed below its neckline, a bearish move. But, last night’s futures action took ES back above its neckline, a bullish development. Yet more proof that trading the drivers of the algos has become much easier than trading the equities themselves.

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ES still has a chance to hold to the falling white channel.  If so, we can call this bounce a bounce and get on with the drop to 2533.Yesterday’s bounce necessitates a redraw of SPX’s falling channel.  The close below the neckline was bearish, but it seems likely to test the SMA20 this morning.  If it fails, then the downside target of 2536 remains in play.The latest on RB and CL: their lower targets likely victims of SPX’s needed bounce. If so, this is all the downside we’re going to get for now. We’re still nervously long CL.  Nimble RB traders might wish to play a bounce here. Ideally, this is just a bounce on the way lower for stocks.  USDJPY still hasn’t played out as I expect it to, with 111.75 as our next target.UPDATE:  11:13 AM

SPX has reached its SMA10, just above the white channel line.  This would be a logical place for it to turn if it’s going to.  Note that VIX has bounced off the yellow channel bottom and rising white channel bottom.  It’s not a bad place to go long with stops in the 11.30 range if you believe stocks have more potential downside.  But, as we’ve seen countless times, just because stocks should correct more doesn’t mean they will be allowed to.