An important test lies just ahead.  With SPX and ES having closed below their Head & Shoulders necklines on Friday, the inference is that the bottom just dropped out.  The real test will come, however, if COMP drops more than 1.6% to below 6801.75.

This, our downside target since October 10 [see: Plan B] represents an important fork in the road.  Then:And, now:Not exactly a very straight line — but, it got here, and pretty much on time.

A bounce here and stocks can finish the year at least even.  A failure to bounce, and the bears have a clear path lower.

continued for members…

In the bears’ favor this morning, ES and SPX closed below their necklines — traditionally a signal to start panicking.  Over the past 5-6 years, it has been a signal to consider the possibility that one might be panicking soon.

Note that SPX’s last not-so-bad Fib level is the white .886 at 2579.23.  From there, we start looking horizontal support at previous lows: 2553 on apr 2 and 2532 on Feb 9.  FWIW, a 1.6% drop in SPX would reach 2557ish.

The ES version: Also in bears’ favor:

USDJPY is pretty clearly reversing after backtesting the purple channel and without even reaching the white channel top.  Here, the fork in the road is the red TL, below which the SMA200 becomes a tasty target.

CL still owes us a drop to 45.31-46.02……even as RB should continue to bump along sideways. And, VIX should pop to at least 25 (another test of the channel top.)  A push through 25.36 could get exciting. On the bond front: If COMP doesn’t bounce…look for another 8% (total of 23.4%.)

I’m going to take this morning and update our current positions page.

More later…

UPDATE:  1:40 PM

COMP just reached our 6801.75 target (actually 6799.66.)  Bulls better hope it holds here.  USDJPY suggests it has further to go.

SPX has potential horizontal support… …and, VIX could definitely go a little further.  AAPL is still sitting at even on the session, but is vulnerable to another 20 points downside.Remember, a drop through 6801.75 opens up 6227.I’d be cautious about catching this falling knife unless we first see a reversal in VIX.

UPDATE:   2:10 PM

Speaking of which… VIX just reached 25.22.  The safe bet is to close longs in VIX, shorts in COMP (and, whatever else) but be prepared to reopen on a push up through VIX 25.36. But, this feels like it’s getting out of control.  CL and RB are still sliding, and USDJPY has zero support here (not that that’s ever mattered before.)  VIX is one of the few bullish signals; and, that’s only if it does a hard about face here.

UPDATE:  2:38 PM

Having said that, VIX has been a critical factor many times since October.  This would be the fifth stick save…RB is at channel line support. But, not so much for CL.UPDATE:  3:50 PM

VIX is poking up above its channel line…can it close up there or is this a head fake?While, SPX pushed slightly lower than Feb’s lows.ES has a nice channel bottom at 2463ish.CL still looks bearish. USDJPY and AAPL do, too. COMP is potentially in trouble if it closes down here……or, if VIX closes up above 25.36ish. Watch your stops and be careful if holding overnight.  Plenty of gap risk.   As discussed many times in the past week, former reversals at VIX’s channel top have touched off some pretty impressive bounces.