Our short USD position is paying off in spades this morning, as EURUSD has broken out……and, DXY is plunging.

This should complete the move we forecast two weeks ago [see: The Rally That VIX Built.]

continued for members…

As a reminder:

– DX, currently at 97.05, going to 96.07-96.14
– EURUSD, currently at 1.1199, going to 1.1470
– USDJPY, currently at 110.05, going to 108.82

We got the USDJPY move the very next day, though it only reached 108.89.  Because of the passage of time, DXY’s downside could be limited to 96.19 rather than 96.14.  And, EURUSD might be capped by another channel line at 1.1348.

In any case, this should knock SPX down a bit.  Assuming it breaks below the SMA20 at 2433.46, the yellow channel top is just below at 2432.46.  If that falls, then we should have a good shot at the purple .618 at 2430.13, the purple channel bottom at 2428, and, ultimately, the IH&S target backtest and gray .886 at 2422.55.VIX has broken out and, if it can push back into the rising white channel, has plenty of room to rise before running into more serious resistance at 11.17-11.30.At this point, the only things propping SPX up are USDJPY — which is still pretending to break out……and, CL — which is on track but running into interim overhead resistance.Bears’ biggest potential spoiler of all: ES.  It has made a habit of bouncing at 2428 — its IH&S target which it originally reached back on Jun 1. We saw similar patterns occur in Mar and May……and, of course, earlier this month.  The name of the game is to force an algo-led breakout via CL, USDJPY and/or VIX, then defend the hell out of it as the algo drivers are reset for the next “breakout.”

SPX has its own version, which revolves around the yellow channel top it just bounced off.UPDATE:  11:25 AM

After that strong bounce, SPX has backtested the broken gray channel bottom and SMA5 200.  It is hovering around the SMA10, so it might take a stand here — even if only to postpone the 2430 tag. USDJPY and CL continue to prop up SPX.  Both are making highly irrational (yet, hardly unusual) moves. Bottom line, the SMA10 could be held – depending on how much energy TPTB are willing to expend.  VIX isn’t a good candidate as the all-time lows should be saved for something more critical.  USDJPY can always go further, as the BoJ is beyond all-in.  CL is a little ahead of itself, but can always slide back into place after the close.

If SPX drops back though 2438.18, I’d want to be short — especially if any of the above algo drivers is slipping.  Another spot I neglected to mention earlier is the gray .618 at 2432.01.  IMO, it is more important than 2430.

I’m still on the road today, so will sign off for now.  I should get a chance to post again as we approach the close.

BTW, I will be in NY and Boston from Jul 24 — Aug 11.  If you’re in that neck of the woods and would like to get together, please drop me a line.

GLTA.