It starts out with a bright, buoyant red balloon, but goes downhill awfully fast.  (spoiler alert: a sewer-dwelling, child-devouring clown that somehow isn’t all that funny.)

So it is with this market.  The S&P 500 has been floating along for over two weeks, close enough to 2500 to reach out and snatch it any time it likes.   Yesterday, it finally tagged our 2510.87 upside target and managed to close above 2500, with only two days to go before quarter-end.

Is this the start of the next leg up, or should we be alarmed by those sinister sounds gurgling up from the sewer?  [And, no, it’s not just RBOB, which hit our next downside target overnight.]

continued for members…SPX finally tagged the 1.272… …a feat ES accomplished last week.  The usual response, when markets aren’t being propped up, is a drop to the .618.  For ES, this would correspond with 2459.46, which intersects with the white channel backtest on Oct 2.  For SPX, the .618 is at 2462.79.Interestingly enough, VIX has a potential peak on Oct where it could backtest the yellow channel bottom, the purple channel bottom and the SMA200 all at once.  2459.46 is only 40 points below current levels, so we’ll not get too excited about it unless it drops through.  But, it’s something to keep an eye on.

Meanwhile, RB capitulated, slightly overshooting our initial backtest target overnight and threatening a rebound after slipping slightly below the Sep 21 lows.Another item to keep an eye on: USDJPY.  It is seeping lower, and seemingly has its eye on the SMA200 which is about to intersect with the SMA10 (112.048 and 111.997 respectively.)

We’ll know something interesting is about to happen if SPX can dip below the purple TL and SMA5 200 at…what else?…2500.Note that the purple TL and the red TL connecting the top are parallel to one another…a channel.  It crosses 2500 around 11:00 ET.I have some charts to decipher and a few errands to run, so I’m going to leave it at that for now.  I’ll check back in after a few hours.  Keep an eye on RB, which should still be aiming for 1.5114 if it breaks below 1.60 as I believe it will.

More later.