Does it matter if market leaders, some of the biggest market cap stocks in major indices are tanking?  Does it matter if earnings and guidance are, more often than not lately, disappointing?  Do the algos even care, or are they perhaps mesmerized by the fact that VIX is back below its 200 DMA? How excited might they get if it slips below horizontal support at 16?Meanwhile, the bond market — which might ordinarily be nervous over this morning’s strong employment report — is correctly concerned about inflation that’s too low.  As we’ve discussed often over the past 4 months, the sharp slide in gasoline prices has knocked the legs out from under inflation concerns and, therefore, the rationale for interest rate hikes.

Yes, AMZN is stumbling this morning.  But, like AAPL, it was careful to stumble only as far as the nearest support.  In other words, the bulls might not be quite done.

continued for members…

Note that SPX is back above its 2.24 Fib extension……while the Dow is bumping up against its SMA100 and SMA200……and, COMP is testing its SMA100. If they all fail to push through, the bears should enjoy a great February.  This should shape up as a great test of the ability of the algos to overcome fundamental weakness.

But, I don’t think it would take much to push them over the hurdles ahead of them — VIX could probably do it all on its own.Consider that the dollar is hanging on, and could quite easily for another session or two. And, RB and CL are rebounding from yesterday’s damage. Even the bond market is cooperating.  Despite the 10Y’s intraday dip, the 2s10s is back above the yellow TL – i.e., it is buying some time for equities to slip a little higher.  I don’t expect it to last, but here at the open it’s being supportive. My favorite upside target remains 2732.47.  But, any sustained drop back below 2703.62 (the 2.24 extension) is problematic for bulls.

UPDATE:  3:40 PM

Roughly a 20-pt swing in SPX today.  But, it’s back above the 2.24 extension at 2703.62, so all is (supposedly) well. 

VIX briefly swung above its SMA200, but it’s back below now.  And AMZN managed to hold its channel backtest.  Even our yield curve model is back in do-no-harm mode. And, of course, RB and CL are exploring new highs.

Things are as clear as mud.  And, since it’s a weekend, it’s difficult to be certain enough to overcome the risk of a gap in the wrong direction.

If I had to guess, I’d bet on the downside.  But, I believe there’s still a chance that SPX reaches 2732-2741.  If VIX closes below 16.09, it’d be a pretty good sign.

UPDATE:  4:08 PM

Huh.  How ’bout that…