VIX completed the first breakdown we discussed yesterday, but stopped short of dropping through the white channel midline.  Thus, although the implications are bullish, equities have yet to actually break out.continued for members…

ES was able to remain above the red midline and white channel top, stopping just shy of its .886.  It’s being supported by CL, testing the white channel top again. Although RB clearly topped out yesterday at 1.7825, CL has clear potential up to the larger white channel top around 50.

DXY continues to look weak, though it’s still off its recent lows.  This morning’s mediocre jobs report isn’t helping much.USDJPY continues its long, extended backtest. For those watching COMP, it has already tested its .886 and is holding back for now.Look for SPX to test its channel top (2480ish) and/or .886.  After that, it’ll likely be up to VIX.  If it can decline and remain below 10.35, then we likely have a breakout ahead of us.  Remember, breakouts are quite common around holiday weekends when low volume makes it relatively cheap and easy to push through resistance.UPDATE:  11:25 AM

SPX has reached the top of the falling white channel, but not quite the .886.  ES came within 2 points of its .886.  VIX, for its part, is continuing to slump — which suggests there’s more boost to come.

For short-term and conservative swing traders who are long from Wednesday’s breakout, this would be a reasonable point at which to take profits.  Frankly, from here it’s a crap shoot — especially with the 3-day weekend factored in.

I don’t see anything wrong with shorting here as long as your stops are relatively tight and you keep a close eye on VIX.  If it keep inching lower, the odds of a reversal aren’t great.  It’s quite common to get a negative looking close on the Friday before a 3-day weekend, just to suck in unsuspecting bears.

UPDATE:  1:00 PM

Just to make it official…SPX just tagged 2480.  Things have slowed to a snail’s pace, here, so I think I’m going to duck out early.  Again, we could get a little reversal here into the close.  As always, only hold short if you can hedge or deal with the considerable gap risk over the 3-day weekend.  In fact, this being one — the odds favor those who hold long. VIX continues to slide, a half-hearted effort to nudge SPX higher.  There is no nearby support.  But, I sure wouldn’t go into a 3-day weekend short vol.Have a great weekend, everyone!