Despite an initial 10-pt surge, SPX came within 0.48 of our next downside target on Thursday — despite attempts by USDJPY, VIX and CL to prop it up.

Now, even with the futures up several points, it appears the downside might not be done.  After tagging the SMA200, USDJPY has dropped below it to our next lower target. And, CL has ignored an easy opportunity to break out.

Could we be in for a replay of last Thursday, with our next downside target in play?

continued for members…

Note that SPX reached the .886, as did ES, but the channel alignment leaves a little to be desired.  If USDJPY and CL linger below their breakout opportunities, I’d take that as a sign that there’s more downside to come.

The H&S points to a close brush with the 2322 lows, as do both channel placements.

SPX has dropped through the yellow channel top it was trying to hold since Feb 9.  It seems to be seeking stronger support, with our leading candidate the SMA100 and yellow channel midline around 2300-2306.

ES suggests the same outcome.

USDJPY is moving on to our next downside targets — again, ahead of schedule.

While VIX continues to try and delay and defuse the reaction to mounting geopolitical fear.

UPDATE:  9:39 AM

I’d take advantage of the initial bump on the opening to establish a short position — at least until CL and USDJPY start actively supporting higher equity prices.  At the moment, they’re not helping at all.

Initially, we’ll look for the actual .886 at 2328.65.  But, I suspect that whatever bounce we get there will falter and we’ll be looking at a drop through 2322 to the 2300-2306 range.  The SMA100 will be up to the white 1.272 at 2306.99 in a day or two, so we’ll stick a pin in that price range for now.

Note that VIX’s breakdown from the purple TL on Thursday hasn’t really gained any momentum.  In fact, this morning’s dip has practically disappeared.  Remember, on Thursday it spent quite a bit of time dancing around the white channel bottom, trying to fine tune SPX’s squiggles.  We should expect more of the same today.

 *  *  *

I have some meetings outside the office this morning, so will only be able to post until 11:30 or so.  I should be back before the close.

 *  *  *

UPDATE:  10:23 AM

SPX has slipped up past both falling white midlines, which has me a little concerned for the downside case.  We’ll see how it does after tagging the SMA5 100.  Note that USDJPY and CL are still arguing for lower.  Only VIX is keeping it on the rise.

UPDATE:  10:59 AM

SPX has backtested of the white midlines and is threatening to push up to the SMA5 200.  A reminder, this is exactly when Thursday’s initial spike ran out of steam.  I’d hold on to the short position here, as I believe USDJPY is about to break down.

A push through 2340 would likely yield 2343.50.

UPDATE:  11:23 AM

SPX is pushing up through the SMA5 100 on continued VIX deflation. Since I have to leave in a few minutes, I’ll leave you with the reminder to either cover here or be prepared to ride it up to the SMA5 200 at 2343.40ish.  In either case, I expect a reversal down below 2322.  But, as always, watch your stops.  And, only if SPX should push past the SMA5 200 would I open a long position.

UPDATE:  3:54 PM

Turns out USDJPY really liked that white midline, as it’s popped .92 intraday — back above the SMA200 — despite Mnuchin’s comments about the dollar being too strong.

Along with VIX’s 8% plunge, it has propelled SPX 19 points higher.  Anything north of 2346.50 is, technically, a breakout of the falling white channel.  By riding the SMA5 10/20 all day, that appears to be the point of today’s meltup.

CL is the only bearish development among today’s charts, dropping through the neckline and .707 Fib.  I wouldn’t put too much stock in this move, as it’s probably just taking advantage of the leeway granted by USDJPY and VIX.I’m not too crazy about the small falling white channel within the larger white channel.  The “breakout” is only a breakout if we draw it based on the highs.  Drawn from the lows, there is no breakout at all.

Furthermore, the ES chart shows a tag on the larger white channel .786 line that suggests a drop through to the .236 which is 2310ish — only 10 points above the SMA100.  Today’s highs came very close to the top of the falling purple channel.

VIX’s chart isn’t much help at all.  It’s back in the realm of the just plain silly — with plenty of potential turning points but nothing definitive – despite the news of two additional carrier groups steaming towards North Korea.

Bottom line, I don’t have a very strong feeling one way or the other about tomorrow’s open.  If my 2307 target is in play, it’s likely at least a week away.  Interestingly, the falling white channel will intersect with the rising yellow midline at 2307 (the white 1.272) around Apr 25 — which just happens to be the day the Carl Vinson is expected to arrive off the South Korean coast.  

The SMA100 will arrive at 2307 in the next 2-3 days.  So the yellow target would represent an overshoot.  But, stranger things have happened.  And, I should stress that none of the above will happen if tensions — whether justified or not — continue to abate.

GLTA.