What a difference a day makes.  Yesterday started off with the usual VIX ramp that turned into yet another breakdown below support, sending SPX to new all-time highs.  Our Blusterer-in-Chief turned that around in a jiffy.

Moments after we adopted a short position at 2490.10, he raised the rhetorical stakes with North Korea, promising fire and fury (oh, and power) if they dare threaten the US again (which they promptly did…again.)

Part of equities’ problem this morning is VIX, which (live by the sword…) is back at our yellow channel bottom yet again.  Moving above it would leave a mark.

The other problem is yen strength, which sent USDJPY to within 0.10 of our downside target before it was called on to help stabilize things.Assuming nuclear holocaust doesn’t envelop the markets in the next few hours, we have some interesting targets to consider.  The most obvious is the purple .886 at 2463.46.  Beyond that, things would get really interesting.

continued for members…

UPDATE:  9:43 AM

SPX has reached the .886 and is threatening lower.  I wouldn’t automatically assume a bounce here, especially as VIX has pushed above the yellow channel bottom.  But, note that VIX has reached the top of the rising white channel it seemed to have abandoned.

This should provide overhead resistance.  But, it remains to be seen whether it’ll be strong enough to send VIX back below its SMA200 at 11.98.

Anyone playing the bounce should use very tight stops and be prepared for overhead resistance when the SMA5 10 arrives on the scene, possibly around the SMA20 at 2470. BTW, the interesting targets mentioned above merit discussion.  First, if SPX can’t hold the red channel midline, its bottom is down around 2440 — also where the purple 1.618 is located.

But, I noticed last night in doing some big picture charting that SPX’s SMA200 is about to reach the 1.618 extension created by the drop from 2134 to 1810.  This Fib was backtested almost immediately after SPX pushed through it.  But, it was almost too quick to count as a solid backtest.

Do I think TPTB will aloow a 140-pt drop?  Probably not.  But, it’s worth keeping in mind if the rising red channel should break down. UPDATE:  10:00 AM

There’s the SMA20 and SMA5 10.  I’d take profits on the bounce and wait to see whether VIX can remain below its SMA200. If it can, the bounce should continue.  Otherwise, we’d want to revert to short here. We should also keep an eye on CL and USDJPY, which are in a position to help — CL by remaining above its SMA200 and USDJPY by remaining above the .786. BTW, some of you might have noticed that posts are a little slower than usual these past two days.  My desktop computer is in the shop for a major tune up, so I’m operating with a somewhat slower laptop for the rest of the week.  It doesn’t have the same video capability, so I’m limited to 5 charts rather than the usual 12.  Thanks for bearing with me.

UPDATE:  10:20 AM

ES is back to its SMA5 200.  Remember that breaking above it yesterday unleashed a lot of algo buying.  Also, here’s a better look at  VIX’s rising white channel.  I suspect VIX will plunge below its SMA200 any minute, probably as soon as SPX’s SMA5 20 arrives at 2470 so that it can engineer a breakout and recovery.  Remember, we also have an EIA crude inventory report coming out in a few minutes.  With CL sitting at its SMA200, this one could matter more than most.I’d love to be wrong on this…but, all things considered, I would prepare to take a long position on a VIX breakdown/CL breakout.

UPDATE:  10:32 AM

CL is all over the map, but VIX is breaking down.  I’d revert to long here with relatively tight stops.I’m still bearish on oil.  For those trading it, I’m still looking for 48, followed by 45.76.  But, by merely delaying its drop, here, it could help stocks recover.

UPDATE:  10:53 AM

Taking a quick break here.  SPX is back above SMA5 10/20 and VIX is cooperating.  Keep an eye on those MAs and CL’s TLs of support.

UPDATE:  11:30 AM

Decision time, as SPX’s SMA5 10 is about to cross below its SMA5 20.  This is normally where TPTB get a little nervous and start hammering VIX.  UPDATE:  11:58 AM

Should get at least a pause here at the red midline and SMA5 50.  VIX has reached the yellow channel bottom.  If it bounces, SPX will dip.  If it drops through, SPX should target the SMA5 200 at 2478.35 next. UPDATE:  1:26 PM

SPX is breaking down just a bit, so far only enough to backtest the SMA20 as VIX backtests the SMA200.  I would close out our long position on any sustained drop through the SMA20.  If would short if this happens in conjunction with a move by VIX above its SMA200 again (11.98.)UPDATE:  1:50 PM

I have to hop onto a conference call that could last an hour or so.  Nothing much new — lots of sideways.  But, at this rate, it can hardly be considered bullish.  Same suggestions as before… UPDATE:  2:31 PM

Lots of mixed signals, here, as SPX leaked below the SMA20 on continuing USDJPY weakness and an increase in VIX (back above the SMA200.)  But, VIX is back to the white channel top and CL is ramping higher.  The net result — SPX seems somewhat adrift.  In the absence of a strong downturn by VIX, I’d remain short.  But, I’d keep a very close eye on VIX, especially around the 12.37 level.  This is probably the most important determinant of where we go next.

UPDATE:  3:03 PM

Unless VIX suddenly collapses, I’d hold short.  But, ES is hinting at a recovery — which is how these things usually wrap up for the day.  UPDATE:  3:16 PM

VIX is starting to collapse.  I’d ditch the short position here and go long if SPX rises above the SMA20.  Of course, if VIX bounces off the SMA200 instead of dropping through it, all bets are off.  It could be an ugly close.  But, at this point, it seems we’ll get the usual VIX-powered meltup into the close.

UPDATE:  3:57 PM

Resistance at the red midline, here.  Can it leapfrog overnight?  Sure.  But, I wouldn’t bet on it.  I think it’s probably more likely that it reverses lower, but wouldn’t hold short overnight unless you can handle the gap risk.UPDATE:  5:20 PM

I just learned I need to be out of town tomorrow to be with a relative who’s in the hospital.  I will do my best to post in the morning, but I’m unsure of my schedule at this time.