Yesterday’s targets are still intact with the exception of USDJPY, which broke down in order to accommodate SPX’s SMA200 backtest.If this is a garden variety backtest, the bears have nothing to get excited about other than a nice 50-pt short trade.  Note that the last time USDJPY broke down, however, it turned into a 190-pt drop.  So, watch closely as SPX approaches 2762 (ES 2764) — ideally around 10:30AM.  Yesterday’s gap is slightly lower at 2760.88 (ES 2764.75.)Most of the attention this morning is going to the 2s10s yield curve, which is approaching inversion……as TNX approaches our downside target. If the SMA200s don’t hold, things will get very interesting very quickly.

continued for members…How tentative is USDJPY’s hold on the rally?  A breakdown of the purple channel could do some real damage.  We already saw a retracement to the .618.  The next solid support, if the SMA100 doesn’t hold, is way down at the .786/SMA200.The equity picture…

Remember what happened the last time VIX bounced off its SMA200.  For now, it should focus on filling the gap at 18.03. And, as we discussed yestereday, DJIA didn’t break out.Nor did COMP — which has a big gap to fill at 7332.79.Even AAPL is at risk of a breakdown.  If the little gray channel doesn’t hold……it’s a long way down to true support.With an OPEC meeting just ahead, RB and CL are holding steady.  They can only rally so much, however, before they disturb the new low-inflation picture. It’s the currency side of the equation which presents problems – specifically dollar weakness.  We’ve seen numerous threatened breakdowns, and there’s no guarantee this one will follow through.  But, it’s important to keep an eye on it as the possibility of an economic slowdown and dovish Fed meeting take effect.UPDATE:  12:05 PM

SPX, ES, DJIA, COMP — all closed gaps.  ES and SPX dropped through SMA200s – waiting to see what happens when VIX closes its gap at 18.03.

UPDATE:  12:10 PM

VIX pushing above 18.03, ES and SPX dropping through SMA200s.  Holding short with loose stops.  Just to remind folks, ES did not make a new high and missed completing a sloppy IH&S by about 10 points.  Old timers might remember this happening before [see: Ten Lousy Points.] UPDATE:  12:28 PM

Fan line support here for SPX, but ES is closing in on its 2.24 at 2728.  If that breaks, then  SPX’s 2.24 at 2703 is the line in the sand. UPDATE:  1:43 PM

There’s the 2.24 extension.  We should get a bounce here.  If not, then 2597 is definitely a possibility. Updated… I’m going to take a break, will be back around 2:45.

UPDATE:  3:35 PM

A reminder of what happened in 2011…

…and, a reminder of what lies below today’s 2.24. I think we’re heading lower. If the white channel at 2600-2610. holds, no big.  We’re halfway there already.

But, if it breaks down, then there are four tasty targets from 2280 to 2448 that make great sense — with a backtest of the 1.618 at 2138 being the bearish holy grail. DJIA is sitting right at its SMA200, which should make for a nice indicator. COMP seems very likely to me to continue lower.Even AAPL has broken down. VIX — still plenty of upside.