Coincidence? I Think Not

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One of the signals which convinced us to call a top a few weeks ago [see: Correction Warning] was the bullish (bearish for stocks) 10/20 cross in VIX. Should bears be concerned that the cross just unwound?

And, in an attempt to answer the many questions raised by my observation that SPX’s bounce at a 10.0056% decline from its recent highs – 19 cents away from exactly 10% – I offer the following charts. Note that VIX collapsed seconds after SPX reached the 10% correction mark. Coincidence? I think not.

Note that ES has formed another rising wedge that should see SPX open modestly higher. But, it would take more fancy footwork to keep the bounce going.

continued for members…

If the decline is to continue, VIX’s 10/20 cross will need to unwind tout suite. This morning’s shot across the bow was quickly retracted, but we’d need to see a sizeable pop.

Likewise, we would need to see USDJPY run out of steam here at its SMA10 – even though that falls short of a full backtest of the red fan line.EURUSD is well on its way, which represents dollar strengthening. But, it won’t be long before DXY reaches a backtest of the broken purple channel. In other words, DXY will need to show some weakness against something in order not to rejoin the broken channel. I vote for the JPY. If I’m right, GC should bottom very soon if it hasn’t already at the red channel midline – perhaps at the purple channel midline (1860ish) but certainly by the SMA100 (now at 1846.20.) SI is looking a little dicier, threatening to drop through horizontal support and more likely heading for the .618/100 SMA intersection at 21.70 or the red channel midline where the SMA200 will cross at around 20.14-20.63. Note that the 10Y improbably continues to hold on – supportive of stocks for the time being.Last, note that CL and RB are getting the usual EIA inventory day bounce. With data coming out at 10:30, I’ll be looking for at least a backtest of the rising TLs. Note that API disappointed, with a 700K build vs a 4MM draw expected. As discussed yesterday, RB is in the process of backtesting its SMA10 and dashed red TL.more later…