If our charts are to be believed, we are on the cusp of a significant move in currency pairs and the bond yields.

10Y yields plunged back in March, then began rebounding via a long, drawn-out flag pattern that broke down in late June. Since then, it has been tracing out an equally long, drawn-out triangle pattern that has also broken down.

It has correlated nicely with DXY, albeit with a 2-3 day lead. If TNX’s latest breakdown holds, we might finally see the next leg down in DXY and the long-awaited, significant moves in USDJPY and EURUSD.

Needless to say, the dollar’s demise hasn’t helped the trade deficit, which just reached all-time highs despite White House’s claims to have strengthen the trade picture.

It also doesn’t bode well for stocks. If the past is any indication, October could be a very difficult month.

continued for members…

USDJPY and DXY have completed their backtests but have yet to follow through. Since the 10Y is also backtesting, we should watch for it to break down, prompting DXY and thus USDJPY to do the same.

Thus far, gold and silver continue to indicate a bottom, meaning that DXY’s bounce has likely run out of steam. The daily TNX chart shows the clear relationship between yields and stocks.

Following yesterday’s breakdown in CL and RB…

…we’ve been watching for the other pieces to fall into place that would allow ES’ rising white channel to join SPX’s in breaking down.

VIX continues to stand in the way by dropping at the open yet again, falling back from another SMA10 test. We’ve seen this game go on for days or even weeks in the past, so I wouldn’t discount its ability to continue to support stocks. But, all it takes is the proper trigger for volatility to pop yet again – say, a spike in coronavirus cases that causes shutdowns in a few large cities.

UPDATE:  11:32 AM

SPX is almost to the top of the falling red channel. A few pennies more and it will have filled the Sep 16 gap at 3384.45.

Note that VIX is holding its SMA50 at the moment.

I have to run out for an appointment, should be back around 2:30.

UPDATE: 3:50 PM

Nice reversal at the red channel top. I’ve since swapped colors, and the new shallower channel will be white and the broken one red.

VIX is bouncing off its SMA50, a good sign for bears. Though CL and RB both had nice pops and are backtesting higher targets on in inventory draw.

The biggest surprise of the day – TNX shot through overhead resistance and is now backtesting it – an apparent breakout. I view it, instead, as a head fake. But, we’ll find out over the next few days. Caution is warranted.