It was pretty obvious, a couple of weeks ago, that oil and gas were finally going to break down [see: Once More With Feeling.] The trick was how to accomplish it without tanking stocks in the process.
This morning, VIX tagged our downside target – the bottom of the long-term yellow channel. The 38% plunge since May 29 has (so far) easily offset the damage that the oil and gas breakdown would have done.
Now that the channel has been tagged again, will we revisit the 2017 strategy of daily algo nudging? All those dips below the yellow channel bottom (signified with yellow arrows) were instrumental in getting and keeping SPX back above 2138 (the 1.618 extension of the 2007-2009 crash.)
We should find out soon enough whether the 2.24 extension at 2703 is equally important.
continued for members…
I think going long VIX at 11.63 with tight stops isn’t a bad bet.
Futures are up a few points…
…which should allow SPX to reach the top of the rising purple channel: 2759ish. At that point, it will have to choose between the purple channel and the red. I believe it’ll backtest the SMA10 at 2725.
RB, in the meantime, is holding the falling purple channel aimed at 1.99ish. 
And, CL is holding its falling channel aimed at 59-61. 
Remember, we have EIA inventory data coming out at 10:30.
USDJPY continues to do as much as it needs to in order to prop stocks up. But, note that it’s not pushing through its SMA200 — a signal that TPTB aren’t ready to pull out the big guns. If stocks start tanking, sure. But, for now, it’s the dry powder.
UPDATE: 10:07 AM
VIX has bounced back above the red wedge top – technically a breakout. Upside targets include the SMA200 at 13.83. If it breaks above that, then we’re looking for horizontal resistancee at 18.90ish, followed by the red .618 at 20.06.
The difference in the 5-min charts shows that RB has the better downside momentum and is the better trading vehicle at this time. Aside from the charts, RB would have the more immediate impact on June inflation data.
UPDATE: 10:45 AM
A build for CL and a huge build for RB.
The only fly in the ointment for equity bears…