The weakening dollar continues to weigh on equities.  The FOMC has its work cut out for it as investors are increasingly having a hard time believing that a rate hike is on the way.

After three weeks of avoiding its SMA200 like the plague, USDJPY broke down through it last night and is headed for our next lower target.  This has left ES on the brink of a channel line of support.

continued for members…Plenty of room left to go for both EURUSD and USDJPY… If ES’ purple channel line doesn’t hold, we could see another 20 points downside in a jiffy.  Note that it’s backtesting the IH&S target again.The view from SPX’s standpoint…the red channel top is a gimme, with the white channel bottom at 2425.50 a strong possibility if ES is willing to dip below its support just a bit.VIX has the power to make it happen if it merely runs up to tag the white channel top. If SPX’s white channel doesn’t hold (and, it’s subject to some wiggle room in terms of fit) then the next support is down at the SMA10 at 2415.77.  Note this is also the yellow channel midline/top and relatively important support.UPDATE:  10:00 AM

Potential turning point for another leg down, but it’ll require VIX to bounce here at its SMA10 and channel midline instead of its usual deep dive. As I mentioned yesterday, I’m taking some vacation this week.  I’ll post a little later, updating some currencies, gold, etc.

GLTA.

UPDATE:  12:50 PM

Little red TL is holding so far, with CL’s pre-API ramp currently outweighing VIX’s rally.USDJPY is assisting in prop job.   Note that if SPX were to fall to the white channel bottom now, it would constitute a higher low than this morning’s 2428.12.  So, by delaying the drop (if it occurs) they might have prevented as much downside as would otherwise have been the case.

UPDATE:  3:04 PM

SPX just closed this morning’s gap at the SMA5 200 at 3:00 — a common intraday peak. It would be falling like a rock if VIX hadn’t broken down and CL wasn’t spiking higher.  This is a prime point for a reversal, but don’t be surprised if they keep it propped up through the close.  Tight stops are advised for those inclined to try a short, here.

UPDATE:  3:35 PM

Breakout for VIX = breakdown for SPX and ES — which is finding horizontal support at its IH&S target.  I’d cover here (and, reshort on a move lower) or at least prepare for a potential bounce. 

If this doesn’t hold, the SMA10 is looking good.  It should be up to 2419.40 tomorrow.  And, that’s right about where the yellow channel top is right now.  As always, don’t hold short overnight unless you can hedge or deal with the gap risk. UPDATE:  3:44 PM

Updated target…could be reached today if VIX can stay broken out.  Otherwise, tomorrow morning (or, not at all!)