ES reached our next downside target a few hours ago. This is important support. The size of ES’ bounce and VIX’s reaction upon reaching its 200-DMA (26.09 – don’t worry, it will) should determine next steps.

Assuming that Powell will not be able to satisfy the market’s concerns in his interview later today (tools to deal with inflation? what tools? how, without raising interest rates?) we’ll look for a bounce there and a drop to the red .786 where it intersects with the rising white TL at 3721.25 – ideally on Monday.I’ll be working on the recent Update on Currencies for the remainder of the day but will check back in if anything unexpected happens.

I recommend this Bloomberg article for anyone trying to get a handle on what’s going on in the bond market. I continue to believe the inflation/interest rate dynamic will be the most important variable going forward.  If you’d like to know what time it is rather than how the watch works, check out the recent Oil/Gas Update.

GLTA.

UPDATE: 2:00 PM

ES just reached our next downside target two days ahead of schedule. This is interesting support.continued for members…

It’s worth noting that SPX has TL support here, but loads of downside targets once the TL breaks down. Since ES keeps insisting the falling red channel isn’t important (at least to the upside) I’m increasingly optimistic that it will break down and we’ll see the combo white .618 and 1/272 at 3500 – potentially when the SMA200 arrives in a few days – or, if that breaks down, the combo white .786 and 1.618 at 3371-3382  – ideally where it intersects with the yellow midline in 10 days or so.SPX’s next downside targets are the .618 at 3507.64, the SMA200 (currently at 3466), the white .786 at 3387.27 and the former low at 3233.94. I sorta prefer 3039.05-3047.34, though. It’s the yellow 2.618 Fib extension, the white 1.272, and the purple .500.

I should point out, though, that the purple TL SPX just tagged is proximate to the dashed red TL that connects the Feb and Sep 2020 tops.  On the other (bearish) hand, that purple TL would also make a nice neckline if we can get much of a bounce at 3723. If it happens fairly quickly, it would target 3485-3490ish – not far from the white .618 at 3507.64.