As virtually all of our models have been warning, stocks are taking a big hit this morning. The tension has been building, simply waiting for a catalyst. With OPEX/Quad-Witching in the rear view, the UK virus mutation certainly fits the bill.

ES, off 128 points a few hours ago after coming within 6 points of our 3730 upside target, has rebounded sharply from its lows as algos cheer VIX’s pullback after testing its 200-DMA.

But this appears to be just the start of a very rocky road for markets which have previously ignored the worst disaster in any of our lifetimes. Can anyone really be shocked?

continued for members…The bigger picture for ES and SPX:

…and the VIX-inspired rescue. Needless to say, the 10/20 cross signal performed admirably.

Note that the SMA200 target was hit in one fell swoop rather than waiting for the MA to decline to the yellow TL as we expected. The big tell, DXY, has rebounded sharply – the fear trade our charts suggested.So far, however, USDJPY has merely backtested its latest broken TL… …after EURUSD came within 0.0064 of our upside target.GC more convincingly tested the falling purple channel top and reiterated the test of the red and purple channel midlines.  While SI made the backtest of the white fan line at 27.50 official.  RB is declining sharply after tagging our gap close at 1.384. While CL came up 0.79 short of our channel top and 1.618 target at 50.22.  Will we get a substantial follow through on this morning’s tumble?  I believe so. The bond market and our yield curve model says we will, and it has yet to come close to fully playing out.

The 10Y has yet to even reach its channel bottom…

…meaning that ZN has yet to make a noticeable recovery. The 2s10s is still relatively contained.Last, for those following BTC, it officially tagged our target at the 1.272 Fib at 24165.89 pretty much on time with respect to our cycle chart.  I believe it will struggle to break out of the rising blue channel and a pullback to backtest the broken rising pink channel is likely.

However, a push above 24166 opens up the 1.618 and 2.618 Fib extensions at 29890 and 30108. So, as always, play the price action you see versus what you think a rational investor should be doing. BTC’s price action is an clear example of irrational exuberance.

more later…

UPDATE:  3:45 PM

ES briefly climbed back on top of its SMA10, recovering nearly 100 points from its 4AM lows. VIX nearly gave up its intraday gains and CL was back above its SMA10. At this point, everything is back in a bearish alignment. But, that doesn’t rule out another rescue bump into the close a la Friday. Like I wrote earlier… a rocky road.

Lest there be any doubt, this is the same sort of manipulative crap we usually get – hammering VIX in order to prompt algos into buying. As in March, the ends justify the means – or at least that’s the way the Fed sees things.