Futures tagged our initial downside target overnight as markets are once again reminded that the pandemic is far from over.

The shutdown headlines out of Europe won’t surprise anyone who has been watching the COVID-19 numbers.

The US, which was considerably less successful in suppressing cases following the initial or second surge, is on the same path – but from a much higher base.

continued for members…Note that this represents another backtest of the SMA10. A drop through it opens up much more downside to ES’ rising white channel bottom at 3346 – 3375ish. As we’ve discussed before, SPX’s rising white channel has already broken down and it was backtested at the white .886.

VIX’s SMA10 is back above the SMA20, but just barely.  The SMA200 remains an important line in the sand, and it hasn’t even been tested yet. There are several charts which are similarly on the brink, one way or another – with the most important being the 10Y.Remember, stocks were pummeled the last time it broke down.

As expected, its decline has put downward pressure on the 2s10s – which has broken down below the latest red TL.  Our 35 bps target from months ago remains in place.DXY is again backtesting the fan line from Mar 20……as EURUSD seeks out support… …and USDJPY is backtesting a minor TL off last week’s highs.A breakdown in rates shouldn’t be supportive of the DXY – though the shutdown headlines from Europe could offset the impact.

GC and SI have both been knocked back a bit – with SI still more susceptible to additional downside. Last, oil and gas are breaking down as expected. If they are able to make lower lows, the implications for equities are quite serious. A reminder: EIA inventory data is due out this morning. I have a couple of conference calls and an appointment out of the office. I hope to be back in time for the close.

UPDATE:  6:00 PM

I guess we shouldn’t be too surprised that ES/SPX rebounded so much. After all, tomorrow is OPEX and VIX’s SMA10 (26.90) closed .02 below its SMA20 (26.92.)