For the past several months, we’ve been patiently waiting for DXY’s next leg down. Given the importance of preventing a EURUSD breakout, it seemed apparent that USD weakness would need to come courtesy of JPY strength. Today, push finally came to shove.

The implications for equities are significant.

continued for members…

If, as I expect, EURUSD is meant to refrain from breaking out……then DXY’s continuing breakdown… …will need to come at the hands of USDJPY’s collapse.This puts stocks in the crosshairs. So far, VIX’s inability to top its SMA200 yet again… …has limited ES’ downside. But, a breakdown below its neckline would open up the floodgates. The next downside target of 3394.50 is aligned with SPX 3400.

We’ll keep a close eye on CL and RB, which have been clinging to the top of falling channels for two weeks now. With EIA inventory coming out today, that might finally come to an end. RB is one bad session away from resuming its 10/20 bearish cross. The last time it happened RB fell from 1.23 to 1.07.Responding to dollar weakness, 10Y rates are testing resistance yet again. I don’t think TPTB would permit a breakout……as a breakdown in ZN would exacerbate equity weakness. So, this test should hold. It has also resulted in 2s10s threatening another breakout – which would devastate stocks.The biggest positive to DXY’s weakness, of course, is that GC and SI are getting a much needed boost.  GC is back above the critical 1923.70 level with only the SMA50 standing in the way of a nice rally……and SI has officially broken out above the latest red TL from its Sep 1 highs. UPDATE:  10:55 AM

Crude saw a slight draw, while gasoline saw a sizeable build.  Notably, crude inventories are 10% above the 5-year average for this time of year – not a good look in the middle of a recession.

This explains why CL is just testing TL support…

…while RB has broken down below its.

stay tuned…

UPDATE:  EOD

ES managed to remain above its neckline one more day – the third in a row – and tagged out a goofy little TL multiple times. Clearly, someone is working overtime to prevent the breakdown. And, maybe they will. VIX has yet to break above its SMA200 or even undergo a bullish 10/20 cross. Stranger things have happened. FWIW, DXY and USDJPY had a very hard day – with more downside likely to come.