VIXploitation continues, as the “fear index” continues to drive stocks higher.  Yesterday’s collapse in the last 30 minutes… …was enough to shave 10 points off of SPX’s losses. Nothing new here.

Note that ES’ previous pushes above its 2.24 Fib (dashed purple line) required that VIX dip to the yellow horizontal support at 16 (b, c and d.)  The latest, however, required a drop below that support.  In other words, it’s requiring more effort to effect the same result.Are investors finally catching on?  Maybe, just maybe, there’s more selling pressure from the carbon-based crowd than usual.

continued for members…SPX’s channel was slightly broken.  Though, the 9 points gains in ES as we approach the open could put it back inside the rising channel instead of a clean backtest. Though, ES seems to still be intact.  Downside exposure still appears to be the SMA10/SMA200.Currencies are still a non-issue – generally supportive, but that’s about it.  DXY still hasn’t managed a full backtest and USDJPY continues to creep higher. Gold is getting a slight bump this morning, but not enough to change our position.  To go long again, I’d want it to move past 1346.30.  Even then, it represents only a 23.1 potential gain. I suspect the next significant move will be to close the gap at 1303.70.RB and CL have broken out slightly.  While this is not too surprising, given that stocks need the support, it is concerning from an inflation standpoint.  Note the shaded areas, which represent the year-ago range for each.  While RB will have additional headroom in March, I have to wonder if February is a little ahead of itself and needs a pullback soon. ZN, which had slightly broken out of its consolidating triangle, fell back and tested the triangle bottom yesterday.  This obviously delayed the potential breakout by a day, but doesn’t change the fundamental picture.

And, last, AAPL continues to bump along on its moving averages but is looking like it could use a backtest.  By going sideways for the past two weeks, its channel bottom now correlates with a legit Fib target at 161.47.

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Note that VIX has behaved rather predictably over the past 6-7 months.  We’ll examine some of the important turns.  Please refer to the white letters below.

a: VIX broke out of a falling white channel dating back to Mar 2018.  The subsequent rise to 28.82 corresponded with SPX’s drop from its all-time high of 2940 to 2710 — a little below its SMA200 and just shy of its 2.24 Fib at 2703.

b: A 107-pt bounce to test the SMA100 was followed by a 214-pt drop to the H&S neckline.  This established the new, falling red channel for VIX.

c: VIX’s drop to 16.09 at c corresponded with a 212-pt bounce back above the 2.24 Fib and SMA200.

d: VIX’s drop to 15.94 (another lower low) put SPX back above the 2.24 and SMA200, but at a lower high.  It lasted only one day.

e: VIX broke out of the red channel — now a flag pattern — and ran up to just past its .618 Fib at 34.97.  This resulted in SPX dropped through its H&S neckline and plunging a total of 453 points.f:  Mnuchin convened the Plunge Protection Team, which obviously voted to crush VIX and “save” the market.  VIX began a drop from 36.1 to 13.85 (so far), a 61.6% drop in two months.

g: instead of reversing at the falling purple channel midline or SMA20, SPX popped up through resistance and continued its journey to the 2.24 — all courtesy of VIX, which dropped back into the falling red channel instead of backtesting it.

h: VIX dropped through its SMA200 and the support at 16, pushing SPX back up through its 2.24.

i.  After backtesting its SMA200, VIX dropped back below the 16 support and to new lows not seen since point a where it originally broke out.  As a result, SPX pushed above its SMA200 and is testing the purple channel top.

UPDATE:  2:40 PM

Nothing to see here, folks.  Just a normal random walk, a fair marketplace where buyers and sellers can come together for a free exchange of market-priced instruments.  Not.Things are clearly rolling over.  Can VIX avoid the usual late-in-the-session smackdown?Don’t look now, but ZN is breaking out again.Could they just let TNX get on with it?

A rare show of weakness by USDJPY… …as RB and CL seem to be rolling over. SPX might get another shot at breaking down.UPDATE:  3:50 PM

Sure enough, ES got a bounce off that red TL (actually, after it broke down slightly, but I’m sure that’s a coincidence.)So, we have a rising wedge in ES and a falling wedge in VIX.  The only problem for bears is that after VIX’s falling wedge broke out, TPTB forced it to new, successive lows. The bond market is still saying there’s trouble ahead.  So, I’m still bearishly inclined.Watch the algos try to force ES above 2794.15 at the close…