Oil reached our next downside target range yesterday.  This completes a 40% decline for CL since our Oct 3 top call [see: VIX Takes the Plunge] and brings our YTD gains to 177%.

From our Nov 9 Update on Oil:

CL just reached our next downside target of 59.47 and, RB has reached our target range of 1.58-1.62. This is important support for both which, if broken, would portend much more downside.  If it fails, there are much lower targets that would come into play: the gray .382 at 57.47, the purple .618 at 55.36, the gray .500 at 51.47 and the purple .886 / white .236 / gray .618 at 46.02.

Yesterday’s tag:

While it’s always nice to nail a forecast target, the commentary which accompanied that post was at least as important:

Ultimately, oil and gas’ path forward will decide much about interest rates and broader markets.

CPI dropped from 2.95% in July to 2.18% in November, low enough to prompt many Fed watchers to call for a halt to further rate hikes — which is exactly what led us to call for a sharp decline in oil and gas prices in the first place.

The big question is whether it’s enough of a drop.  For the answer to that, we’ll have to wait for the FOMC’s statement this afternoon.

continued for members…

Charts to watch today:

VIX is on the fence between a breakout and a breakdown.  If it doesn’t punch through, it has a clear path down to 23.25 (TL), followed by all sorts of targets: the SMA10 at 22.20, SMA20/50 at 20.52-20.83, the white channel line at 18.29 and the sMA200 at 16.03.  If stocks start to fall apart, count on VIX to help.

SPX is still technically in a downtrend, even with the overnight ramp job.  It could rise as high as 2600 without breaking out of the small falling white channel.  The bottom of the larger channel is around 2490. And, COMP is still holding its backtest target…barely. We can’t say the same for NKD.  Its rising white channel has broken down and it’s testing its June 2015 highs for the 6th time.  The critical difference this time is that NKD just experienced a death cross back on Dec 7.  So, a drop through 20990 should be shorted for 19665 and, should that fail, 18631.

On the currency front, USDJPY appears to be focused on its SMA200 yet again… …while EURUSD is rallying up towards its.  Net result…will DXY finally break down?

While CL and RB have additional downside potential (especially CL, to the .618 at 45.47) there’s a pretty good chance they’ll at least bounce — if for no other reason than to ramp stocks higher going into the FOMC announcement.  After all, it’s better to sell off from a higher level than a lower level.  Playing the bounce isn’t a bad idea.  Just be prepared to re-short if CL falls back through 46.02 and, especially, 45.47.

UPDATE:  11:50 AM

VIX is tumbling……extending SPX’s pre-FOMC ramp.  As we’ve discussed, this is not an unusual approach to FOMC announcements.  The trick is keeping the rally going after the announcement and press conference.

A reminder of where the downside pivots are in the event the machines aren’t happy with the dovish hike everyone seems to expect (or, God forbid, the hawkish hike!)  Obviously, the timing of the lower targets is not as indicated below.  Note that gold just reached its SMA200 and the bottom of our target range.  While it could go a little higher intraday, this is notable in that it suggests DXY might get hung up on the white channel midline (96.14.)

DXY could remain on the rise, strengthening against JPY but weakening against the euro. But, that’s a tough task.

My base case continues to be that EURUSD pops up to its SMA200 at 1.17ish and USDJPY dips down to its SMA200 at 110.84.  This would be quite bearish for DXY, potentially opening the door to the white channel bottom around 93.60ish.

It’s interesting that TNX is breaking down — if only slightly.UPDATE:  1:50 PM

SPX is up 25 points and is sitting atop its SMA5 200 as we approach the announcement.  Note that VIX is sitting right AT support – suggesting a breakdown which would be supportive of stocks.ZN has officially tagged our upside target. Remember, a downturn in 2s10s is bearish. AAPL still looks extremely vulnerable here. And, COMP is right on the edge… UPDATE:  2:00 PM

Sure doesn’t sound dovish to me.  ES is backtesting its broken channel……but, VIX’s breakdown didn’t hold.Watch out for pops above 25.20.UPDATE:  3:00 PM

The equivalent of ES’s 2460.  Note that AAPL just dipped below its .500 Fib.  The next support of any kind is our 144.48 target from October.And, COMP has dropped through its backtest/midline support.If it were to drop through its 1.272, the next support is way down at 5275, followed by 5132.  That would be another 20-22% decline.