See if you can spot the period during which the cash market was open in the USDJPY and WTI charts below. This one’s almost not fair, as VIX’s “breakdowns” have been as regular as clockwork.Now see if you can spot why the ramps happened when they did, and why our next downside target at 2383 isn’t such a problem for the bulls.  Below that…well, that’s a different story.continued for members…

Note that our 2383 target lies right on the yellow channel top as well as the red .886 Fib.

The last two times SPX was allowed to dip below its SMA10, it led to a plunge below the yellow channel line.That’s why I like the 2383 target.  It’s a nice, neat backtest of the yellow channel as well as a legitimate Fib target.  We haven’t had such a legit pullback in quite a while.

UPDATE:  9:50 AM

VIX has retraced exactly .886 of recent losses, meaning we should start worrying about a bounce unless it pushes through.  The yellow channel bottom is at 11.24ish.  Note that USDJPY has broken down. With any luck, SPX’s .886 tag will coincide with ES’ channel backtest.UPDATE:  9:58 AM

I’d cover here, as ES just backtested its red channel and reached its .886.  Might be leaving a point or so on the table, but that’s okay.  Odds are it’ll find a way to tag the yellow channel top, either with another wave down now or later when the channel passes through the .886. 

USDJPY has further to drop before reaching the white channel bottom.  And, CL hasn’t made much of a move at all. UPDATE:  10:07 AM

This is why it’s so difficult to push SPX any lower: USDJPY at its channel bottom, ES at full backtest, VIX not wanting to break out, CL not wanting to break down… My hunch is we’ll get a bounce up to the falling SMA5 10 somewhere around 2388, then another dip down to 2382ish on a drop in CL.

UPDATE:  10:16 AM

Something like this…?  We’ll know it’s safe to go long when VIX starts tumbling and USDJPY is bouncing off the white channel bottom.UPDATE:  10:25 AM

That should do it.  I’d revert to long here with very tight stops. Watching VIX and USDJPY for confirmation… UPDATE:  10:37 AM

Note that VIX just tagged the underbelly of the yellow channel again.  If SPX is able to bounce here, it’ll involved VIX retreating.  I couldn’t help notice that XIV, the inverse VIX ETN, has reached support.  Probably a good buy here at 77.28 if you believe this dip will be bought as all previous ones have been.  If it falls below support, watch out. UPDATE:  11:06 AM

Quick progress report….  SPX has reached the red TL which ended up not being of any consequence.  But, it’s also reached the SMA5 20, which is usually instrumental in rebounds.  The next real potential resistance comes at the purple midline around 2390.50, followed by the SMA10 at 2392.53 (there’s also a gap to close from yesterday at 2392.79 and Tuesday at 2392.44.) Here’s the big picture, showing the potential downside if the yellow channel top should fail. I’m going to take a 15-min break.

UPDATE:  12:21 PM

SPX just reached the purple channel midline and SMA5 50.  We could get a pullback here, as VIX has also reached the white channel top and USDJPY its white channel .236 line and SMA5 100.  Note that ES has almost reached its SMA10.  Odds are TPTB will attempt to hold any pullback to the rising SMA5 10.  If they’re able, they’ll hold it to the purple midline itself at 2390ish. UPDATE:  1:09 PM

ES has backtested its SMA10, but SPX has a few points to go.  Going to need VIX and USDJPY to make a statement here by breaking down (VIX) and out (USDJPY.)  Mihgt be aiming for intersection of SMA5 100 with SMA10 towards the close or the SMA5 200. UPDATE:  2:00 PM

Another tricky moment here for SPX, as ES has reached its SMA5 200.  I’d normally expect a pullback here, but SPX is trying to hold its SMA10 and its SMA5 10 will be along shortly.

Furthermore, VIX has plenty of room to make a big impact by dropping through its SMA5 200 and SMA10 over the next couple of hours.It’s a good thing, too, as SPX will have to contend with its own SMA5 200 if it wants to reach the yellow neckline at 2396.15.

Bottom line, watch your stops.

UPDATE:  2:23 PM

There’s the SMA5 200 and (nearly) the neckline.  I would expect SPX to take a break here, as VIX just reached its SMA10 and SMA5 200.  I’d consider taking profits here, but go long again with any push through the SMA5 200 that’s accompanied by a drop by VIX through 10.33 and a push by USDJPY through its SMA5 200 at 114.02.

Nothing wrong with shorting, but it’s likely that the pullback stops at the SMA10 as 2392.53 — so not much of a move.

UPDATE:  2:58 PM

This should be a good place to go long, again.  Tight stops are recommended.  If it doesn’t hold here, the next support would be the purple midline at 2389.UPDATE:  3:23 PM

Not looking great for that bounce, as VIX is climbing, and CL and USDJPY are slumping.  I’d cut the long loose on any drop through the SMA10 — even if it is a head fake. UPDATE:  3:34 PM

Got through 3:34 without the SMA10 breaking down — a good sign.  Note that the purple channel top is also the gray .886.  Time for VIX to plunge below 10.33.  Just saying…

And, in case things go that direction and get busy into the close, please remember not to hold long overnight unless you can hedge or handle the gap risk.

UPDATE:  4:00 PM

I guess we’re going to have a little mystery overnight.  Back to cash on VIX’s failure to rescue SPX at the close — though I suspect it’ll get some help in the after hours for those willing to abide by the earlier warning.