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There’s a lot going on this morning. S&P futures were off as much as 97 points earlier…
…nailing our downside target from Feb 14 [see: A New Day, Same Old Nonsense.]
As we discussed then (and just about every day since then):
The big picture for stocks hasn’t changed. There are upside targets which have opened up as the result of “breakouts,” but IMO the breakouts are bogus. So, I’m expecting more downside…
Central bankers will certainly do their best to contain the damage the coronavirus is doing to markets. But, it remains to be seen whether the usual gimmicks will be up to the task, especially if the virus grows at the same rate as Italy with cases and deaths doubling every few days.
Even though the US has relatively few cases, it’s only a matter of time before the coronavirus affects every single person in the US. My projections indicate we’ll see over 500 deaths within the next month. How many businesses will remain open?
Can Bullard’s and Buffet’s cheerleading on CNBC possibly be enough to offset the most serious threat to the global economy in the past 20 years? I seriously doubt it.
Other targets tagged this morning include VIX…
…which has tagged our 23.28 target from Jan 27 [see: More Where That Came From.] Remember it was our daily VIX chart which suggested that this downturn would likely arrive in late February.
And, perhaps most alarming, the 10Y has dropped through our 14.50 target – not to mention its Sep 2019 lows. Our forecast ultimately calls for much lower lows, but the lack of even a bounce here at 14.29 should trigger additional selling from the algos.
If ZN breaks out past our 133’040 target from last year, things could get very ugly very quickly.
continued for members…
The 10Y will certainly get much attention today, but it’s VIX which suggests the huge potential risk which lays ahead. 
The red TL it’s testing dates back to Feb 2018. A breakout would trigger a lot of selling programs.
This would open up the many downside targets we’ve discussed over the past couple of months.
There are countless downside targets, most of them backtests. So, it will be extremely important to keep an eye on the factors driving the algos.
The currency picture is pretty much as expected, with the USDJPY giving up much of the breakout gains which were supposed to protect stocks.
EURUSD is still bouncing off the critical channel bottom we’ve discussed…
…which leaves DXY failing to hold its breakout support.
A side note regarding USDJPY…NKD is about to test its SMA200. So, it will be especially important for USDJPY to be extra vigilant. A drop through the SMA200 would trigger additional selling across the board. Can USDJPY surge enough to offset fears over the virus? I think not. But, it certainly bears watching.
Oil and gas have given up much of their recent gains — which is certainly not helping the equity situation.
Back to the bond market… Note that the 2Y is well below 1.40%.
And, the 2s10s is hovering around 11bps.
We discussed above the bigger picture for TNX. Note that 14.46 is important channel support. A drop though it opens up a huge can of worms for stocks. You can see it on the weekly TNX chart…
…and the weekly ZN chart.
For AAPL watchers, the key price to watch today is 290, the 1.618 extension the stock ignored on the way up. It should serve as a good backtest target.
For gold bugs, note that GC has nearly reached our IH&S target of 1708. It’s obviously way ahead of schedule, but resistance is resistance. Anything between 1700 and 1735 is fair game. 
UPDATE: 12:50 PM
ES just officially backtested the broken purple channel top – without making a new lower low. This would be a logical place to take a stand.
SPX hasn’t quite reached its backtest, but ES usually gets dibs in situations like this.
NKD just backtested its SMA200, adding to the bounce argument if it can hold.
Though USDJPY doesn’t quite look finished. It’s channel backtest would come at 110. A drop through it would open up the SMA200 and points south.
FWIW, I think DJI has more to go – perhaps 27,700ish.
Though RUT is backtesting its breakout point all over again. 
VIX continues to be vitally important. It has broken above the red TL and made a slightly higher high.
At this point, I favor lower prices: at least ES 3076 and SPX 3047 for starters. The next big test if ES 3212 breaks down is 3163ish. This would be the bottom of the rising white channels for SPX and ES from Dec 2018.
I keep asking myself at what point Mnuchin convenes the PPT and the Fed announces emergency QE…
UPDATE: EOD
It’s been a while since we did this, but it seems like a good time to review the big picture. Zooming in on SPX shows why our downside targets are what they are.
QE interrupted the tag of the channel bottom which might have occurred in 2009.
Since then, the yellow acceleration channel has taken SPX back up to and through the white channel midline. 
The 1.618 Fib got in the way in 2015, resulting in multiple backtests of the 1.272 Fib. The December 2018 plunge established the bottom of the yellow channel and backtested the white channel midline for the final time.
The red channel guided SPX from Jan 2018 until the breakout in Nov 2019. Neither the red channel nor the 2.618 was properly backtested. SPX 3047-3101 would accomplish both.
Since that breakout, we’ve seen multiple acceleration channels established and subsequently break down. The purple channel was one such channel. SPX broke out of it and, just today, backtested it. The smaller white channel from Dec 2018 is still intact.
This leaves us with plenty of downside choices, depending on aggressively the Fed and Treasury respond. 
Former Minneapolis Fed Pres Kocherlakota wrote an op-ed today advocating the Fed cut 25-50 bps immediately rather than wait for any real damage to be done.
Another perspective: will DJIA backtest the white neckline or the red TL/SMA200?
VIX is at horizontal resistance, with much more upside potential if it punches through.
GLTA.