The backtest we expected last week played out almost exactly as planned.  So, naturally, we’re getting a fairly typical Monday morning meltup.

None of last week’s troublesome issues have dissipated, but the market has made a statement about additional downside.  All we’re waiting on now is for VIX to follow through with a breakdown.

continued for members…

VIX still has a path to 16.03, but it would be quite easy to break the gray channel.  Note that it’s already back below the SMA200.

The 10Y has rallied a bit and is closing in on the triangle top again.
But, the dollar is showing weakness against the euro, if not the yen. CL and RB are still settling lower. And, we’re left wondering whether ES is heading for another red channel rejoin or backtest.

SPX has missed two of its most aggressive upside targets from a timing standpoint: the 261 at the yellow channel top and the 1.272 at the red channel top.  So, it seems likely that we’ll get a more gradual rise from here — perhaps with frequent backtests.

The key, however, will be on holding the January highs at 2872.87 and angling towards those upper Fib levels — whenever the timing might be.UPDATE:  9:35 AM

The official channel breakout.  Important downside support is now 2879.50 and the closest upside target is the SMA10 at 2892.07.More later.