The last time VIX cratered to below its 50-day moving average in two days, ES popped over 3%. Then, as now, SPX had committed the egregious sin of dipping below its 10-day moving average as it approached important Fibonacci resistance. The difference, now, is that SPX is on the brink of a breakout above that resistance.

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The 1.272 is the key Fibonacci level. Although we didn’t see a significant reversal at the .786 which would suggest a butterfly pattern reversal here, there have been no significant reversals for going on five months. If not now, then the market could continue melting up to the 1.618 at 5638 or the IH&S target at 5727.

There is no reason to believe that SPX won’t break out, particularly if VIX drops even slightly below its SMA50 to the red TL from Dec 12 (13.13ish.)

Zeroing in, SPX closed at almost exactly its .886, but the biggest previous reversal was at the .786, suggesting a move to the 1.272 or 1.618 more so than a big reversal here.

Currencies remain somewhat supportive of stocks, with further gains in USDJPY available if needed.

One potential fly in the ointment: energy markets. CL and RB are both pushing higher, to the extent that the 10Y is back to its SMA200 at 4.192%. If it should push above this level, equities might get a little skittish – particularly if tomorrow’s economic data come in hot.

For now, everything remains on the brink. Keep an eye on EIA inventories due out at 10:30 ET.

GLTA.