The market is quite healthy, or so goes the narrative.  Yet, day after day, we see signs of it “breaking” in the after-hours – only to be “fixed” in a V-shaped recovery the next day.

The usual “fixers,” oil, VIX and USDJPY, have limitations.  Oil can only rally so much before generating worrisome inflation headlines.  The yen can only sink so low before it starts to hurt Japanese consumers and corporations.  VIX can usually be counted on to decline when necessary.  But, there are lines in the sand that have a history of mattering.

With USDJPY and CL approaching important overhead resistance, is it now up to VIX?  Can it manage to inspire new highs or is that too much to hope for?

continued for members…

VIX has tested its yellow channel bottom over and over for the past couple of weeks.  Beginning in late August, it managed to generate new highs in ES.  But, the last few tags have presided over lower highs.

It’s worth noting that the Sep 21 plunge didn’t quite reach the .886, leaving the door open to another try — which is quite likely unless stocks aren’t meant to make new highs just yet.

Today is a pivotal day, as it’s probably the last chance it has to spike up to the SMA200 where it intersects with two important channels.  If VIX fails to spike up to this obvious target today, then stocks are much more likely to be in the clear for the next week or so.

While ES/SPX have clear upside targets, they need help.  SPX successfully held its backtest yesterday, but it required VIX’s pre-open decline to avoid the backtest failing.It has been successful in holding the rising purple channel for months. But, these repeated overnight declines aren’t inspiring much confidence.It missed the opportunity to reach the 261.8 when the yellow channel line reached it in August.  The next opportunity is the red and purple channels’ intersection in October.  But first, it must convincingly break out of the white channel.Here’s the simple TL test it faces this morning.  Note how many times it has been propped up at the Aug 29 highs.Likewise for ES.  Like SPX, it missed its SMA20 the other day.  But, the SMA20 (currently 2098.46) has continued to rise.  So, now it has the opportunity to tag it without registering a lower low.  This is the kind of constant fine tuning we’ve seen many times over the past 8 months.I like this chart best, as it shows how tentative ES’ red channel is, and illustrates the logic of an SMA20 tag and another backtest at the Jan highs — both of which would flesh out the white channel. My best guess on USDJPY is that it has to take at least a pause after backtesting the broken white channel again.  It could continue to grind higher, but probably won’t be able to spike higher as it has over the past two weeks.And, a particular variation on CL’s chart suggests it has either run out of steam or is about to.  This is the log chart, showing two channels intersecting at one of the .618 Fibs (76.50 and 79.32) just above. If it runs out of steam, and neither CL nor USDJPY come to the rescue, stocks will either decline or VIX will get hammered again in the next day or two.

Other charts to keep an eye on…

DB is back down to its neckline — very important support.

TNX is resisting breaking down……which has propped up the dollar versus the euro……and, in general.I’m out visiting clients today and tomorrow, so posting will be spotty until Thursday.

GLTA.