The Calm Before the Storm

Futures are up 10 points overnight, but are still well within the 42-pt range set over the past two days following the latest breakdown.We have a pretty plausible case for considerable additional downside.  But, as we all know, holiday weekends are infamous for pattern-busting breakouts.

VIX, perched on the line in the sand between a rally and a plunge, has a clear path to levels which would practically guarantee a sharp rebound.  But, that has been the case the past few days, when rising channels broke down across the board.  Hence, our fascination with the downside case for equities.Throw in the fact that CL and RB remain overly elevated (and, also on a precipice of their own), our yield curve model is still bearish, TNX and DXY have much further to drop, and it’s hard to feel bullish at all.Then, there’s this canary in the coal mine.  DB has fallen an additional 15% since our last look [see: What is Deutsche Bank Trying to Tell Us?]  It has another 10% to go before reaching our 12.30 target.

That would be a total 39% drop from its December highs.  As one of the biggest banks in the world, with $50-60 trillion in derivatives, should we be alarmed?

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