After a couple of days of VIX rising while stocks spiked higher, it only makes sense that VIX is falling while stocks are tumbling. This is the bizzaro world in which we’re living.

Unless it bounces sharply on our channel bottom target today, add CL to the list of algo drivers which have experienced a bearish (for stocks) 10/20 cross. It has been in a bullish alignment since May 11.

Recall that RB crossed on Tuesday and USDJPY crossed on Aug 27. Despite the administration’s insistence that everything is peachy, the evidence is building that the market will finally take notice of the economy’s dire straits.

continued for members…

RB broke trend yesterday and also made a lower low.

USDJPY is bouncing in an effort to forestall a serious decline, but it’s high time that stocks do some backtesting. Perhaps it’ll be allowed this time.

Remember, we have two potential falling channels. The white one has been broken out of a few times, always a head fake. The purple one fits better in many ways, and offers a way out if the pair should decide to push through the SMA50 and SMA100 to tag the channel top (not what I expect.)

EURUSD is getting closer to a tag of its channel bottom – after a long, sideways move which featured seversl headfakes. DXY remains on target as long as it doesn’t break above the SMA20 and backtest the broken purple channel bottom – always a possibility. Gold and silver continue to hint at this possibility. As they have before, they are threatening breakdowns.

Silver has already broken its TL, and is now threatening a breakdown below the white channel midline – important support. As expected, TNX’s little TL broke down and it has only horizontal support to worry about going forward.

ZN has survived the Fib backtest and has clear sailing to the upside. Remember that stocks didn’t fare so well the last time it spiked higher and rates cratered.

So, are we finally going to see that correction? Member Tim M. reminded us yesterday that the Dow has finally closed its last gap. The Dow shouldn’t matter, of course, but it sure has over the past six months. Recall that the market’s crash stopped dead in its tracks the day that DJIA reached its 2016 election levels. As we pointed out yesterday, its RSI chart also suggests at least a pause here.

We’ve seen so many instances where stocks should have backtracked, I continue to caution those who are just dying to short this market. Shorting a meltup is not just tricky, but treacherous. You never know when the Fed or the administration will come up with another scheme to boost confidence (or, at least trigger the algos.)

If yesterday’s highs were to hold, this is what we’re looking at.  The ES version:

And, the SPX version:

As always, keep a very close eye on VIX.I’ll be out the next two days, and Monday is a holiday. So, I’ll be back on Tuesday to take a fresh look at things. Have a great weekend everybody!