ES came within 10 points of tagging its 200-day moving average on Friday and is backtesting its 3.618 Fibonacci extension yet again.

continued for members…

It remains a mystery how the next several weeks might play out. My gut tells me that we’ll muddle along and tag the SMA200 and channel top at around 4060 at year end, but at this point there’s scant evidence.

The rising wedge shown below illustrates the problem. A tag of the channel top would put ES well above the SMA200, while a reversal at the SMA200 would prevent a tag of the channel top — unless it’s delayed until the end of the year when they would (somewhat) converge. The problem is even more pronounced with SPX. While COMP seems content to keep backtesting its broken purple channel as the SMA200 comes into view.VIX continues to be the primary driver here, with no signs yet of a breakout. Until we get one, stocks should be relatively safe. Note that VIX dropped through its .886 retrace on Wednesday and is backtesting its SMA10 this morning. The other factor at play is continued threats from EURUSD to break out above its SMA200.  There is no fundamental justification for it, just good old currency manipulation to prop up stocks. For those watching DXY approach its SMA200, note that it hasn’t tagged it since Jun 25, 2021. A little more USD weakness could get GC up to its SMA200. CL has broken down below last Monday’s lower low and has reached the white channel bottom slightly above our .886 Fib target of 70.19.  We can blame the China lockdown. Or we can credit central banks which should be acting in concert to lower inflation. Either way, we should be near the bottom of this particular wave. XLE continues its divergence from CL/RB.This leaves TNX likely to continue lower for now. Note that its rising SMA200 should arrive around 34.37 around year-end, lending credence to the timing discussed above. Regardless of when it happens, it would be important support. Bottom line, keep an eye on Fib levels. Stocks are still being micromanaged, with a big downturn being kept at bay…for now.