Is It Safe?

It happened 9 sessions before our charts indicated, but ES and SPX both tested their SMA200s yesterday. As expected, we’re getting a nice bounce – primarily on the back of a 15% drop in VIX from yesterday’s highs (and the breakdown to come of the dashed, red trend line.)ES looks likely to backtest its 2.618 extension at 3076.93. The complication, for bears, is that this will put SPX well above its lower 2.618 extension. In other words, it will gap back above overhead resistance as soon as the opening bell rings. What else is new?

It’s tough to see on the chart above, but VIX’s SMA10 was just about to cross above its SMA20 – a bullish sign for VIX and bearish one for stocks. If VIX is hammered today, the bullish cross can be avoided.If stocks’ meltup is to resume, we could still see VIX backtest its broken white channel or the yellow trend line off the 2018 lows which is nearing the SMA200 currently at 24.89.