Did you hear it?  Even on a day like yesterday, with ridiculously low volume, VIX was still whispering in algos’ ears, “look how much I’ve fallen….in fact, I just broke down…time to buy.”

Never mind the fact that its regular overnight ramp job (when futures are easily propped up) was the only reason it had room to fall.  And, never mind the fact that the “breakdown” was manufactured for the algos benefit.  They love this stuff all the same.

It was enough to levitate SPX out of its falling channel (the purple arrow) and, then, above trend line resistance (the yellow.)continued for members…

Short-term SMAs continue to provide a floor.  Even with this morning’s 3-pt dip in ES, it still rests atop the SMA10.USDJPY continues to slide into place……while we wait to see whether CL will wait for the latest API report before dropping to 48ish.UPDATE:  9:40 AM

As ES tags its SMA10, SPX is finding support on a backtest of its broken falling channel.  We should get a bounce here provided that VIX doesn’t break out of its falling white channel. UPDATE: 9:52 AM

Interestingly, ES looks to have broken trend twice, now (the channel and the TL.) And, it’s bumping up against its SMA5 200.   We could be facing a minor turning point, especially as SPX reaches its SMA5 100.  SPX might decide to close this morning’s gap, but it could also reverse at the approaching SMA5 10. UPDATE: 10:02 AM

Perhaps it’s just wishful thinking, but I think we could get a slide here.  I’d try a short position here with very tight stops.UPDATE:  10:17 AM

Nope.  Back to cash.  VIX is starting to get more active.UPDATE:  10:24 AM

Big plunge by VIX and big spike by USDJPY.  But, look where ES ended up…  This might be worth another try at shorting provided ES doesn’t punch through double resistance at 2478ish.  Of course, the fact that there’s double resistance there almost guarantees a further VIX plunge.  I’d try shorting on any drop through the SMA5 10 it’s about to backtest.  But, it’s just as likely (if not more) to run up to tag the .886.

UPDATE:  12:18 PM

A 4% drop for VIX and new highs for SPX…. The silliness should taper off here at the 1.272.  I’d revert to short.

UPDATE:  1:07 PM

USDJPY is picking up steam, but, I suspect VIX will take a stand here.  I’d cover the short here, but re-short in a jiffy if VIX breaks out. UPDATE:  1:31 PM

VIX just broke out, so it’s back to short for SPX on the drop through the SMA5 50 (2483.81), with the likely target of the SMA5 200 (2478.78) or SMA10 (2476.83.)  If neither of those holds, the white .618 at 2474.83 would offer another backtest opportunity — but, do we really need a third?  The key, of course, is whether VIX remains broken out of the falling white channel and above its SMA10 (10.11.)  If so, there’s plenty of room for a deeper drop – especially if USDJPY continues falling. UPDATE:  2:02 PM

It’s hardly a surprise, but VIX just dipped below the red TL and should soon test the SMA10 and white channel top.  If it plunges through the SMA10, SPX should be done dropping. USDJPY’s drop has already been arrested – at least for the time being.  Watch your stops. UPDATE:  2:13 PM

Moments ago, VIX dropped through the SMA10.  It has now dropped through  the white channel top in an effort to keep SPX north of the SMA5 100 and purple channel midline.  Assuming it’ll keep going, and send SPX higher again.  I’d cover here, even though there is clearly plenty of selling pressure out there. UPDATE:  2:43 PM

VIX faces potential support at the SMA20 and SMA5 200.  But, it’s bouncing here, so SPX has more downside.  Only if VIX plows through support and drops further should SPX bounce nicely. UPDATE:  3:29 PM

SPX just tagged the .618 and backtested the broken white channel and purple channel bottom…again.  I’d cover here, but re-short if it drops through.

VIX seems determined to reach the SMA100, which means SPX might have further to drop.  And, USDJPY is sliding again. UPDATE:  3:35 PM

This is picking up steam.  Time to reshort, but watch out for a sudden VIX reversal.  Tight stops on this one.  VIX’s yellow channel bottom is at 11.34ish.UPDATE:  3:39 PM

It just got real.  VIX reversed at the yellow channel bottom, back below its SMA100.  I’d cover our short here and go to cash.  Scalpers might even try a long position here with very tight stops.  A return above 2474.25 means recovery is a good possibility.