SPX reached our 6009 target (from August) two days ahead of schedule, leaving ES 6064 as the last remaining upside target in the vicinity.  With ES reaching 6053 overnight, this rally is either due a pullback or a breakout. In short, it’s another moment of truth for equities.

continued for members…Note the big picture charts for both SPX and ES.

Also included today are big picture charts for VIX – which is also on the brink of a breakdown as shown by its RSI. Of course, it has also already dropped below its SMA200, which should provide stronger support if stocks are in for a big drop.

Currencies are also on the brink.  EURUSD is poised for a big rebound or a breakdown, likely depending on the inflation/interest rate outlook. From a fundamental standpoint, eurozone economies are much weaker and thus their interest rates should continue to fall faster than those in the US. This would result in a drop in the EURUSD, which generally hurts stocks.

It would also suggest a breakout in the DXY which, again, is usually bearish for stocks.Of course, USDJPY recently broke back above a TL of support it had dropped below. Should the rise continue it would bolster USD strength, further dinging stocks.The wild card continues to be oil and gas prices. Note that CL is threatening a breakdown again. This time, I think it will happen as the Saudis are now very interested in helping the (future) White House with its little inflation problem. Ditto for RB.

This has enabled the 10Y to forget all about last week’s breakout – a very good thing for stocks.However, it has also caused the 2s10s to break down below the TL of support from June 2023. Members will no doubt remember that while breakouts in the 2s10s cause crashes, breakdowns cause corrections. Should the 2s10s reinvert, this would surely imply a recession, which would likely not be healthy for stocks.

Stay tuned…