It was fun while it lasted.  After 23 straight sessions of VIX being suppressed below its long-term channel bottom, we finally got a taste of real volatility.  This morning, VIX is off over 15% and screaming back toward its recent lows in the absence of any further provocation from our Tweeter in Chief.Has the risk of all-out nuclear war disappeared?  Only time will tell.  But, for now, the algos are happy — as they have been with each tag of the falling white channel top.  SPX’s rising red channel — dented but not broken — remains intact.

continued for members…

We have no shortage of upside targets.

But, the whole point of tagging the bottom of its rising channel is that SPX is now free to return to the top of the channel — currently around 2510.Of course, this presupposes the USDJPY and CL won’t be too big a drag — which appears to be the case for the moment.

USJDPY is holding its own after its recent .886 tag — strongly suggesting the yellow channel midline will continue to hold.Even CL is rebounding — though I don’t expect this to last. It remains a short for me, especially with this bounce.UPDATE:  11:45 AM

CL has sharply backed off its earlier ramp job and is heading for new lows.  This might take some of the bloom off SPX’s rose, though a drop by VIX through its SMA200 at 11.99 would likely offset any damage.  Still, be aware that neither ES nor SPX has punched through its SMA10 just yet.  So, they remain vulnerable until they do.  At some point, we’d expect a backtest of something.  If it were to occur now due to CL’s weakness, we’d likely see 2460ish. Some of you might remember our discussion last week about the SMA200.  It has now reached – for both ES and SPX – a key Fib level that never really got a substantial backtest.  If for some reason the SHTF, this represents the line in the sand we’d likely see from TPTB.  For SPX it’s 2340 and for ES it’s 2337.

UPDATE:  2:48 PM

Another exciting day watching SPX protect its earlier gains…  CL keeps dropping, which is nice, but VIX continues to threaten a further drop which keeps SPX from dropping at all.  We should see that backtest happen any minute, as the SMA5 100 is finally approaching.  I’d be ready to revert to long as soon as the SMA5 100 tag occurs, though it would make the most sense at the channel line (2460.18ish) or Fib line 2458.05.)

If SPX doesn’t turn around there, then the SMA5 200, currently at 2452.14, should suffice.I have to run out for a meeting in a few minutes, will post more this afternoon.