The Storm Finally Arrives

After weeks of gathering clouds, the storm we’ve been watching has finally arrived. S&P futures are lock limit down just a few points above our next downside target.

Not surprisingly, all of our other targets across currencies, commodities and fixed income have either tagged or exceeded our next downside targets, with more to go once the cash market opens.

continued for members…A reminder of our SPX and ES targets:

VIX pushed briefly above former highs, but is falling back at the moment. This is obviously a big tipping point for the “fear index.”Oil and gas have been decimated. CL got a nice bounce at its 1.618……after nearly reaching its Feb 2016 lows. This is obviously well ahead of schedule for our cycle model. Note that it tagged the falling white channel .236 line very precisely.

Gas fell to 1.0574, coming within a few pennies of the .886 at 1.0553, easily tagging our 1.087 target from months ago.

The dollar has been crushed by the soaring yen and euro. The euro pushed up through the purple midline and red neckline. Above 1.1377 or so, the rest of the purple channel remains in play with targets as high as 1.1683 and 1.1936. The more likely case is that CBs jump in and save the dollar, so I’d short on any weakness.

USDJPY dropped through horizontal support and almost reached its .886, which we hadn’t planned on until later in the year. In any case, the .2016 low and white channel bottom are now very much in play, though I’d look for at least a bounce at the .886.

This leaves DXY with lots of short-term options with my favorite being the .618 at 92.691.On the bond front, things are just ugly. The 30Y has fallen off the map……while the 10Y is progressing nicely toward our targets.

Hard to believe the move in the 2Y, but it’s exactly as we discussed last week. It’s falling out of bed at a time when the 10Y is also falling, but not as quickly.

The 2s10s got as low as .03 before bouncing back sharply. Remember, breakout levels are around .25 and .35.

Last, GC came very close to our IH&S target from a year ago. While the .786 and .886 targets are only slightly higher, it wouldn’t surprise me to see GC pull back to backtest the white midline when the SMA200 intersects with it.It should be a pretty crazy day. Unfortunately, I have to see my knee surgeon for my first follow up at 9:30, so will be out until about 11. I’ll have much more to post then.

GLTA.

UPDATE: 11:55 AM

ES slightly overshot our 2728.79 target – my favorite for many months. Note that this is the 2.24 Fib level that played such an important role for SPX and ES from Jan 2018 until 6/3/19 – when it got its last backtest (2728.75.)SPX’s 2.24 is lower, of course, at 2703.62. So, as we’ve discussed countless times, there’s a fair possibility that the current bounce will fail so SPX can tag its Fib. On the other hand, this never happened last June. We got the very precise tag on ES and SPX totally whiffed. So, this remains a tricky moment.Don’t forget, this is also the bottom of the yellow channel which hails from the 2009 lows. This is a very, very big deal. If it breaks down, then the 1.618 Fib at 2138, the 1.272 Fib at 1823 and the larger white channel start to matter more.VIX has backed off quite a bit.And, as discussed this morning, CL and RB tagged logical bounce spots.The 10Y still argues for lower prices.

UPDATE: 4:10 PM

Still hard to say whether ES 2728 or SPX 2703…of course, the tricky move would be to open at SPX 2703 tomorrow morning and immediately start ramping higher.VIX still looks to have more upside room.