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Will the 11th time be the charm? SPX and DJIA should test their 200-day moving averages again, but we’re still waiting for COMP. At 6844, its SMA200 is still 3.6% away. This leaves us with multiple downside targets: the safe picks, where support holds — or the more interesting ones (my preference) that would correspond with COMP’s 3.6% slide [see: The Coast is Clear – For a Drop.]
Then, there are the drops which would result from a true hands-off approach by central bankers — a good 6.8 – 18.8% below current levels. The FOMC punted on yesterday’s rate decision, meaning their “hawkishness” isn’t exactly unbounded.
Bonds and currencies responded as expected [see: Apr 27 Update on Bonds.] But, the dollar and TNX have further to go before erasing their recent exuberance.
In a perfect world, today would put a good scare into the markets, and tomorrow or early next week would be truly alarming.
continued for members…Today’s charts…
SPX should tag its SMA200 at 2614.19 today. But, a 3.6% drop would mean testing SPX 2540 — well below TL and channel support. So, we’ll just have to wait and see. The 8th is still a prime prospect for another low, but the 15-16th is also showing up as a potential lower low.
Note that ES’ SMA200 is at 2614.70, which means it will be reached before SPX’s. This often causes prolonged periods of aimless wandering while the algos get their ducks in a row.
VIX should at least test the yellow channel top with our initial downside targets. If we’re going to see more of a sell-off, then 25.63 or 36.17 start to come into play.
I continue to believe that CL and RB will play an important role in how low stocks will ultimately fall. If they hang at current prices due to the Iran issue, they should help limit SPX’s downside to the SMA200 — always the more likely scenario. If they were tumble, SPX would have permission to drop through its SMA200.
They’ve had plenty of reasons to tumble over the past two weeks, but haven’t followed through. With SPX at critical support (again), we should expect CL and RB to hold current levels and, depending on how much help is needed, to bounce. I’d try a long position here with tight stops.
DXY’s overshoot should be corrected — but, the bankers would probably like to see it hang at these levels as a backtest rather than return to complete channel support way down at 88.25. Much better for inflation purposes…
GC bounced nicely at its SMA200, and faces its first test at a backtest of the broken channel. If it can push through, then we face the prospect of another 4-6% upside.
TNX – still hanging in there. Pretty impressive job of making the TL come to it instead of the other way around. Stocks remain very sensitive to it, whether too high or low.
The Dow remains one of the most interesting charts to me, as it represents the narrative TPTB wish to advance — a strong breakout with legs. Note that the push through its 2.24 extension is at risk if we get much of a sell-off.
To me, this is the strongest argument for a modest decline and a delay on COMP’s SMA200 tag until it’s much higher.
Currencies are still in limbo — with USDJPY’s overhead resistance not quite reached in this most recent push, and EURUSD having overshot on the downside after failing to reach its channel and Fib targets.
Last, another look at FB. Remember, it was a bit of a canary in the coal mine way back on Mar 19 [see: Facebook Flops.] The buyback announcement got it back above its neckline, and then its SMA200. But, it still hasn’t broken out of its falling purple channel.
This is potentially significant. As we discussed back in Mar, SPX has suffered every time FB faltered. If it doesn’t break out here, we could be in for a more serious downturn in the broader markets.
AAPL is somewhat in the same situation. It’s buyback-induced pop has left it in better shape, but still not in the clear. 
As some of you might have noticed, the website has been quite sluggish lately. With all of our targets pretty well defined, I’m going to take the next few hours and try to deal with it. I’ll step back in if something unexpected occurs.
GLTA.
UPDATE: 10:58AM
SPX and DJI dropped nicely through their SMA200s. Note that DJI is approaching an .886 Fib that could produce a bounce — maybe even a backtest of the SMA200. So far, SPX and COMP are very much in sync in terms of their percentage drops.
UPDATE: 1:39 PM
SPX’s gap closed and SMA5 200.
If it is going to make another leg lower, this would be the ideal spot. A close at or near the SMA200 would be a good place from which to construct a big, intraday plunge.
Had a few inquiries re TSLA…our chart from a few weeks ago.
