Ever notice that things seem that much more ominous with the year “2020” thrown in?  It’s not hard to imagine a film noir set sometime in the future where a guy clamps another on the back and says “forget it, Jake, it’s 2020.”

Futures have ramped higher on the usual VIX overnight smackdown, with multiple backtest targets hit yesterday and more due to be tagged today.

continued for members…ES reached the backtest target yesterday, but before the SMA10 could reach that same level at 3505. In other words, there’s a decent chance that ES will take another crack at it today. I’ve switched colors on the VIX chart, with broken white channel now colored red and the new, messy channel shown below in white.It still seems we’re in for a denouement in the currency space sometime in the next week or so.   USDJPY and DXY are searching for support… …while EURUSD is trying to do no harm.The big question for many is whether this will be driven by a big drop in interest rates… …a fear trade… …or the muddled inflation picture – where October PPI came in at 0.3% (1.2% annualized) on sharp rises in food and, to a lesser extent, energy.

In a discussion with a client yesterday, we plotted out the divergences between GC and DXY.  Usually they are highly negatively correlated. But, at other times, they moved in tandem. The correlations between DXY and TNX have been much more consistent with the exception of Point 4, when DXY made a significant bottom as TNX was peaking.I bring this up because I’ve been noodling over the interest rate picture for quite some time. A steady increase in the 10 year, in 2 different waves, has clearly helped support stocks via the reflation narrative (though inflation has been hard to find.)

It seems less and less likely TPTB will allow equities to tumble to new cycle lows. But there is a very good chance that  DXY and USDJPY will be allowed to drop to their support targets in order to be in position to prop up stocks.

We’ll try to figure out how that will play out in advance. But, the charts support an inflection point around Nov 27, the (very low volume) Friday after US Thanksgiving.

UPDATE:  3:30 PM

Another all-out attack on VIX – prompting another rally in ES/SPX. DXY and USDJPY have remained largely on the sidelines while CL  has broken trend again.