We’ve had no shortage of good sessions.  Yesterday was unquestionably more on the bad side.  Could today mark the arrival of ugly?

We have dueling factors this morning as CL and RB have dropped through our next downside targets (including CL’s 200-DMA)… …but, USDJPY is pushing up through the neckline it dropped below yesterday.  VIX will need to act as tiebreaker.  As of now, VIX is well above all of its moving averages — including the all-important 200-DMA.

The bullets are flying and folks are ducking for cover.  Anything could happen.  But, for now, my money’s on Ugly.

continued for members…

A bit of a bump on the open would be a good thing as it would establish a right shoulder as we discussed last night.  Our downside targets are unchanged.  First challenge, of course, the neckline.

After that, there’s a gap to close at 2943.31 (the purple shaded area below) followed by the SMA100 at 2921.67, the .618 at 2898.47 and, finally, the SMA200 at 2827.81.  I expect a lower low, though, so I’ve set my sights on 2816.13 and, if that breaks, 2762.23.

Having already completed its own H&S Pattern, ES will ideally remain below its white channel midline at 2974ish and SMA20 at 2973.08. The key for VIX is remaining above its SMA200 and, ideally, blowing through the top of the purple channel around 18.50. It’s critically important that CL and RB are breaking down.  The algos will have a hard time ignoring this.

RB is threatening to break below the yellow channel bottom — a dangerous development for stocks.  The last two times it did this led to SPX’s Dec 2018 lows and Aug 2019 lows.

And, since RB is so strongly negatively correlated to ZN, this could signal that big pop in bond prices (drop in yields) which almost always accompanies big drops in stocks.

As to USDJPY’s rally, I think it’s a lost cause.  It has already fallen back into the falling white channel……and, NKD looks extremely vulnerable here.

I went back through the past 20+ years and can find no instances of it no closing the gap with its red clouds when more than 500 points above them.  Right now, it’s more like 900 points above the cloud (and our secondary downside target) at 20861.

The Dow’s version of things…

Keep in mind the Census Department will release New Home Sales at 10:00 AM and EIA will release oil and gas inventory data at 10:30 AM.  We have seen some instances in the past of EIA inventory not matching API’s when it’s especially ugly as yesterday’s.

Last time I checked, both the Census Dept and the EIA reported up to the White House.  More shortly.

UPDATE:  10:55 AM

EIA inventory build came in above forecasts… …which should be negative for prices, yet we’re seeing instead a little bounce.  CL is backtesting its SMA200 and CL has pushed (marginally) back above its yellow channel bottom. Meanwhile, VIX reversed at our initial upside target and is approaching its SMA200 as its SMA5 200 approaches… …and USDJPY continues to rally.Can it break out again?  NKD suggests not.  It has thus far been unable to push past its SMA10. Last, ZN dropped…but only to its channel bottom where it’s bouncing.

UPDATE:  1:50 PM

Another one of those days where the algos have assumed control…at least for now.  The goal is to get SPX up to its SMA5 200 at 2982ish.  After that, things are less clear.  Will that be enough of a right shoulder for another leg down, or are TPTB determined to prevent the H&S from playing out?  They’ve done a very good job so far. Zerohedge published a nice chart showing the moment things turned around.  In a rare article critical of Trump:

Ever mindful of what the market is doing, President Trump reminded reporters that the market “went up very substantially after the details [on Ukraine] were read,” and just to make sure it gets a bump, he throws out that “a China trade deal could happen sooner than you think.”

UPDATE:  2:15 PM

If TPTB are going to allow the H&S to play out, this would be the logical place for a reversal.  SPX has paused here at the SMA5 200 as ES backtested a TL after completing a potential wave 4.  Obviously, it wouldn’t take much more VIX or USDJPY manipulation to push SPX a point of two higher, at which point it would be trickier to get it back down.

The bears’ best bet — a strong reversal by RB, CL or ZN. But, with under two hours left in the session on an options expiration day, it’s looking less and less likely to happen today.

UPDATE:  3:50 PM

Certainly not the kind of “ugly” I was expecting today.  SPX has put in a nice right shoulder if — and the “if” is much bigger now — the algos allow it to make any headway tomorrow.  Now that the market is about to close, SPX should have no trouble dropping just enough to backtest the SMA5 200.

CL and RB can go back to their breakdowns. USDJPY can go back to the channel it broke out of. NKD can go back below its SMA10.ZN can get on with its bounce.And, VIX can reset for the next PPT operation.