Futures are off 7 points as we approach the open……up about 10 points from the overnight lows that saw VIX gap back above its SMA100.  While theoretically important, we often see these types of moves after hours — the sole purpose of which is to provide VIX an opportunity to break down the following morning.

Yesterday, SPX and ES both reached their H&S necklines and reversed, with ES’ rising wedge breaking down slightly.  Strike one, but still at bat.

Our yield curve model is still signaling danger ahead. And, rates look likely to dip much further in the coming weeks.

But, tomorrow is OPEX and this is a three day weekend.  We know from past experience that both of these events often result in gaps up over resistance.  So, it remains important to exercise caution in committing to directional trades.

continued for members…

As always, we’ll keep a close eye on VIX.  The bounce back above the SMA100 is significant.  But, it will only matter if VIX can hold the latest little rising TL and the SMA100 itself.

A reminder of VIX’s big picture. It bounced off the midline of the falling white channel……seen a little better here.As we’ve discussed, the horizontal support at 16ish would take it back below its SMA200, so we need to be aware of the possibility of another leg down.

ES’s rising wedge has technically broken down.And, SPX’s channel should break on the open. But, USDJPY is still squiggling higher — putting on a show of backtesting the gray channel top it has retaken.EURUSD is still mired in sideways action as the SMA200 catches down.

Which means DXY’s demise is forestalled at least another day.And, although they keep hinting at a meaningful backtest, RB and CL have avoided the bottom of their rising channels (or any lower lows) for about two weeks. Between another intraday bump, USDJPY’s continuing meltup and a potential VIX “breakdown” below its latest straw man trend line, ES/SPX should get another swing at their necklines.

UPDATE:  1:15 PM

So far, we have a deep retracement that puts ES/SPX right back at their necklines.  Same fuel as before: VIX, RB/CL and USDJPY.

VIX is registering a 3.5% drop, but that’s a function of games played in the last few minutes of yesterday’s close.

Keep in mind that VIX closes at 4:15 a meaningful 15 minutes after the cash equities market closes.  At 4:00, VIX was a 18.70.  At 4:15, though, it “closed” for the day at 19.04.

So, instead of a 1.76% drop from 18.70, VIX is currently registering a 3.51% drop. The algos like the fact that VIX has dropped 3.51% and, with no support here, is apparently on its way lower.A few more ticks is all it would take to drive ES to new highs above 2626.25 (SPX 2625.76.) The bulls are also enjoying nice bumps from USDJPY, RB and CL.