ES nailed our next downside target yesterday, bouncing exactly where it needed to in order to avoid a panic.
But, there’s more to this downturn than meets the eye. And, it changes everything.
continued for members…VIX has broken out of the channel which has guided it lower since the March 2020 crash. This is huge.
Although it has crept lower overnight, it remains broken out. The risk to stocks at this point is that it backtests the yellow fan line from 2020. The charts suggest a target of 32.50 around Oct 15. Anything higher would be a breakout of the yellow fan line AND the purple TL and open the door to 40+.
The question, of course, is how we get there. With a FOMC meeting underway, we can assume the Fed will jump in at some point to quiet the markets – perhaps even providing support into the quarter end.
Whether or not that happens, the path looks lower from here unless VIX tumbles back below its SMA200 at 20ish. Some thoughts on timing…
The argument for a quicker denouement is that USDJPY is at most a couple of days away from its backtest.
However, that dollar weakness could be easily offset – not only by VIX but by EURUSD’s continuing slump. 
Although DXY is edging higher, it hasn’t yet broken out.
And, GC and SI are hanging in there.
BTC, which broke down through the black midline yesterday, got a bounce on the SMA100 and bottom of its cloud – though this is hardly bullish as long as it’s languishing below the SMA200.
Last, TNX has stuck close to home – certainly not breaking out but not breaking down either. Odds are increasing of a gradualy drop to .92% by January rather than the plunge to .814% in September.