It’s a little known fact that if you’re trying to get over the pain of back-to-back knee replacements, you should have rotator cuff surgery. At least that’s what my horoscope said. As a result, my typing skills will be a little off this morning, which means my market insight might also be a bit off.  But, here goes.

After tagging our IH&S target yesterday, ES tumbled back below the bottom of the channel which broke down back in late October. It’s sitting right there at this moment, meaning the bulls and bears have yet to sort things out.

continued for members…The bigger picture:

It’s obviously pretty unusual for VIX to recover after a major channel breakdown, but it should be noted that it has retraced .886 of its rise – a fairly muddled chart. USDJPY accomplished its mission of new highs for NKD (which has slipped back to its 1.618 after busting lots of bearish patterns)… …so I’m still looking for it to settle lower in order to enable DXY to find support without EURUSD breaking out. The inflation puzzle has become increasingly muddled. With the 10Y nearing 1%, one might think reflation is back. But, it’s obviously reached the top of a rising channel from August lows……and the 2s10s is a problem.CL and RB are certainly contributing to that notion.  But, with EIA inventory out tomorrow and CPI and PPI coming out Thursday and Friday, I think CL and RB are likely to stumble back toward their recent lows. Gold and silver had quite a tumble yesterday, but are both up slightly this morning – even though they’re still in a bearish 10/20 SMA alignment. Given that their SMA200s are nearing chart pattern targets, I remain concerned about further drops.

GC obviously gave up 1923.70 again and had trouble breaking out of its red cloud.  The SMA200 will reach the bottom of that falling white channel within another few days.SI’s SMA has reached the bottom of its falling white channel and the red fan line off its 2003 lows. So, it remains vulnerable, especially if it drops through the rising white channel at about 23.47.

UPDATE: 3:45 PM

Pretty much back where we started. Note that VIX backtested the broken channel botom and is off nearly 3%, accounting for most of ES’ stability after a 40-pt intraday decline. Ditto for CL and USDJPY – which put in rebounds that will most likely not last. FWIW, TNX is doing the same – pushing the limits to support DXY (for now) but which has elevated the 2s10s to new highs.FWIW, SPX closed yesterday’s gap today. But, of course, there are plenty more where that came from.