Falling Into Place

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The Dow finally reached its 200-day moving average yesterday, one of the targets that seemed important to the algos. Perhaps significantly, it managed the tag without AAPL and COMP reaching new highs – a nifty trick – and on the same day that ES and SPX tagged our IH&S targets from Apr 6.

We also saw a few more pieces fall into place – particularly USDJPY. It certainly opens up some downside targets as long as VIX cooperates by bouncing at 24.52.

continued for members…

ES and SPX both reversed at their IH&S targets…

…and USDJPY reached its channel top target – where it should reverse. The fly in the bears’ ointment continues to be VIX which, as we’ve talked about every day, is a hop and a skip away from its SMA200. I can’t remember a time when it came so close but didn’t close the deal.

It would have simplified things quite a bit if it had managed one of those 10-second strikes down to 24.51. Though the SMA200 is still on the rise, it’s only rising about 4 cents per day. So, it would take quite a while for it to rally up to VIX. We have other factors in play, of course. CL could be vulnerable here, as the OPEC+ negotiations are under way. A one month extension of the current production cut is the top rumor. But, as usual, it’s effectiveness will depend on the degree of cheating. In the meantime, it continues to be propped up – though a pullback to at least the SMA10 looks likely at this point. While RB continues its bulletproof ways. The moment that TL breaks down, it should be a nice short.Elsewhere, the ECB expanded its QE by another $600 billion to $1.5 trillion. This has had minimal impact on the euro so far, as it was widely anticipated. The dollar slipped slightly lower. Interesting that the 2s10s has pushed up to 60bps, the highest it’s been since late March, on a “breakout” in TNX to .795.Remember, a breakout in the 2s10s is potentially very bearish. We’ve seen a number of spikes higher fizzle as soon as the market stumbled, so it bears close watching.