So far, the bounce is going pretty much as expected.  VIX continues to tumble, USDJPY continues to rebound, and CL continues to sell off.  About the only surprise so far is that traders seem to have taken Dudley’s nonsensical hawkishness to heart.

Given the hesitation USDJPY initially showed in reversing, however, it’s just what the doctor ordered and has left our rebound right on track.continued for members…

SPX should have no trouble reaching (and probably breaching) the SMA20 today as the rotation we’ve been talking about for the past year+ continues.  Ordinarily, we’d look for a pullback there as it coincides with the .618.  The SMA5 100 remains the top candidate, perhaps as it reaches 2460-2461.

CL remains on track for our next downside target at the white channel bottom — currently also the SMA50 at 46.47. And, VIX continues to plunge lower, almost certain to be back below the yellow channel bottom in no time. UPDATE:  9:45 AM

Trying to flesh out SPX, here.  VIX is bouncing and ES has eased below its SMA10 – the “all-clear” for at least a little downside.  I’ve sketched in a rising gray channel for SPX.  My hunch is SPX will tag the SMA5 100 at the channel midline, wherever it happens to be at the time.

It’s a little tricky, as they wouldn’t want ES to stray too far from its SMA10 or VIX to bounce above its SMA5 200 — so, probably more downside stemming from CL than from either VIX or ES.  Net net, SPX might wait for SMA5 100 to come to it rather than “risking” a 3-4 point drop to the SMA5 100. UPDATE:  10:19 AM

Within .04 of the SMA5 100 — probably close enough.  We’ll keep an eye on VIX…if it backs off the SMA5 200, it would be confirmation that the coast is clear for a rebound from the gray channel midline.  If it breaks out, instead, we’d be looking at a deeper drop — with the next support being the SMA5 200 currently around 2454.  We’d have to redraw the channel, but the gray channel is just a guess at this early stage of the game. UPDATE: 10:36 AM

Good, solid tag this time.  Should be a safe entry point, with the next test being VIX dropping through its SMA200 at 11.97 — followed by the more important test of the yellow channel bottom around 11.33.

The fact that VIX hasn’t done so yet suggests that SPX might have a tag of the SMA5 200 in mind.  At this rate, the SMA5 200 might rise only to the .382 at 2458.05 by the close.  If SPX were to drop to tag it say, tomorrow morning, it would flesh out the rising gray channel quite nicely.

UPDATE:  10:59 AM

The scenario discussed above…  A failure of VIX to drop through the SMA200 and for ES to rise above its SMA10 argues for a sideways move to catch down to the SMA5 200.

UPDATE:  2:06 PM

The SMA5 200 finally reached the .382 at 2458.02 and — immediately — SPX started to slide slower.  About 30 seconds later, VIX dipped below its SMA5 200 and threatened to test the SMA200. I’m guessing this means they’re going to postpone the drop until later in the session or until tomorrow morning (rather than assuming the tag won’t happen.)

UPDATE:  3:48 PM

VIX is selling off again.  Along with CL it is advancing the idea of a breakout for SPX above the SMA10.  But, I still believe there’s an excellent chance of a decline to the .382.  As before, it would be easy enough to prevent by a collapse in VIX right about now.  But, that’s not what we’re seeing…