An extremely disappointing payrolls report put February new hires at 20K.  I had to look twice, certain that a digit had been left out.To make matters worse, hourly earnings spiked 3.4% YoY, far in excess of what all the Goldilocks models suggested. It should be entertaining to see how Kudlow et al. spin this one.

Meanwhile, our targets are being hit left and right.  ES came within 1.21 (so far) of our next downside target.On the currency front, EURUSD nailed our next downside target……USDJPY plunged right through its nearest support and is closing in on our secondary target……and DXY is again approaching our upside target.CL and RBOB’s selloffs are accelerating after tagging our upside targets.

S&P futures are currently off about 20 points.  But, our models suggest SPX should tumble a minimum of 35 points before all is said and done.  If that support doesn’t hold, there are potentially very large declines ahead.

continued for members…

The currency front is anything but bullish.  EURUSD and USDJPY should bounce at their .618s, but DXY  faces still overhead resistance here.  Stocks don’t do well when the dollar doesn’t.  And, as the charts below show, previous breakdowns in EURUSD have led to large equity declines.

RBOB and CL have support here, but it all depends on what the ultimate target is for stocks.  If CL breaks below the SMA10, the yellow channel top around 54.52 and the midline around 53 offer good support, especially if TPTB mean to hold ES 2728.79.While ES’ 2.24 extension at 2728.79 is a legit target and should attract some support……it would leave SPX far short of its 2.24 at 2703.62 — setting up a battle for primacy that we’ve seen play out many times in the past year.  SPX also has potential support at its .618 at 2713.88.

The big picture shows SPX’s exposure if the 2.24 doesn’t hold.  The bottom of the rising white channel (2636ish) would be a great target for a right shoulder for an inverted H&S.If that didn’t hold, I still love 2138.

DJIA shows a similar setup – with its SMA200 not far below, followed by its .618 and then a big air pocket.TPTB should care about keeping SPX above 2703.62.  It represents very important support.  A plunge below it, as we’ve discussed in the past, might actually indicate a premeditated plan.

But, as usual, much will depend on VIX.  Initial resistance comes in at the SMA50 at 18.15, followed by the red midline and red channel top around 20.73.  If it breaks above the red channel top as it did in December, then the .786 at 41.71 and the .886 at 45.783 come into play.  Larger scale charts offer some perspective on these moves.

Our bond charts continue to scream “sell!”

UPDATE:  3:00 PM

The decline has been very mild mannered so far, thanks largely to all the algo-drivers working in concert to hold ES 2728.  I suspect the plan is to wait until Monday to tag SPX 2703.  But, there’s still plenty of time for a flush. Note that EURUSD is backtesting the white channel top seen in the daily chart below. VIX is tentatively holding TL support and its SMA200.  If we get a last minute recovery this afternoon, you can bet your last dollar that it’ll involve this TL breaking down. DXY has a little more upside potential, but not much.And, USDJPY didn’t quite reach its .618. We’re seeing strong bounces in RB and CL – but, only back up to resistance so far.

And, TNX has further to go.

Bottom line, this could be the end of the bounce. SPX is going to close below its SMA200. But, I still expect lower prices, and I expect the algo drivers to reverse right about here to accommodate them.

But, since this is Friday afternoon, don’t forget the usual caveats about gaps and manipulation.  Don’t leave yourself with a position you can’t afford if someone with a big enough bullhorn gets behind the bulls.