VIX’s 200-day moving average just registered a 10-handle for the first time ever, dropping to 10.99 this morning… … in order to keep S&P futures in their recently re-acquired rising purple channel.  We saw another test just yesterday (the yellow arrow.)As we discussed last week [see: The Chartist’s Dilemma] this channel dates back to August 17.  It has broken down on multiple occasions, always springing back to life when resuscitated by timely plunges in VIX.With the year-end just ahead, will the excesses of the past year prevail or are stocks finally ready for a rest?

continued for members…

Despite a pregnant pause, RB is clinging to a slight gain at the moment (+0.18%.)  This is where it should reverse if it’s going to.It all boils down to whether or not the ytd gains are “enough.”  SPX is sitting right now at a 20.03% gain, which might well be the bogey that was in mind.  It seems unlikely TPTB would want to give up such a noteworthy achievement at this late date.ES’ purple channel is a rising subset of and about to intersect with the top of the rising white channel from Jan 2016.The white channel is, in turn, a parallel subset (the bottom .236) of the large rising purple channel from 2009.The white channel top will either serve as an upper limit to ES or will serve as a point of breakout.  The white channel itself is rising around 15-17% per annum — well above the historical rate of return for stocks, but well below the small purple channel’s 32% per annum.

The cycling of VIX — bashing it from higher levels to near the lows or making new lows — will continue.  Obviously, VIX can’t drop below zero.  RB and CL can only go so high before inflation becomes a problem.  USDJPY can go higher, but this means a less valuable yen and higher inflation for Japan.

Interestingly, the BoJ announced just yesterday that it’s leaving its monetary policy on hold because of difficulty in reaching its 2% inflation goal.  Inflation obviously won’t remain in the basement much longer if oil prices continue to rise while the yen drops.

So, we’re likely looking at a reversal for USDJPY (strengthening yen) to compensate for an oil and gas breakout — at least over the next few weeks.  DXY certainly supports this thesis.

I’ll review the devil’s advocate case for a higher USDJPY and other levitating techniques in the days ahead.

UPDATE:  12:40 PM

In an effort to push SPX and ES above TL resistance… …and, to offset continuing DXY weakness……as well as USDJPY resistance……CL and RB are breaking out.  CL could run into TL resistance at 58.43…

…and, RB has reached Fib resistance at 1.7458.

To complicate things, VIX is being bid.  Might there be some real live investors out there who are nervous about remaining 100% long at all-time highs over the holidays?As we discussed last week, the CL and RB breakouts could have consequences for CPI.  So, I’m tempted to regard this as a head fake.  But, if USDJPY and DXY tank as expected, we could be looking at the real thing — at least for the next month or so.

Stay tuned…