VIX: Not So Fast

It’s been 14 months since Trump tweeted that “trade wars are good and easy to win.” Since its close that day at 2691.25, SPX has ranged 608 points — from its Dec 26 low of 2346 to last week’s high of 2954.

We’re seen many factors play into that 608 point spread: countless breathless reports of an impending trade deal, a truly laughable GDP print, the FOMC’s humiliating retreat from normalization. The most impactful factor of all, however, was Mnuchin’s convening of the Plunge Protection Team.

Though the decisions made during that call — so important that the heads of the Fed, SEC, CFTC, FDIC and OCC were called away on Christmas eve — will remain shrouded in mystery (minutes are not released), the outcome was obvious: VIX was crushed by 70%.

Now that the narrative is fraying a bit, we’re seeing VIX regain some of its swagger. As a result, ES is tagging successive new downside targets.continued for members…

The lineup:

VIX came within a few pennies of our white midline target — perhaps close enough that TPTB will again hammer it mercilessly. If they’re unwilling or unable, know that short interest is at all-time highs. The most important threshold, of course, is the SMA200 at 16.56. Beyond that, there’s now a big gap to be closed at 15.92.USDJPY is well on its way to a rebouncd from its .786, and is back above the white channel it has more than “backtested.”CL is getting a nice bounce off of nothing in particular, having dropped through its SMA200 overnight. The net effect is that ES is bouncing…backtesting both the neckline of the latest little H&S Pattern and the white channel midline.This leaves SPX with a lower low — technically fulfilling an A-B-C corrective wave. The 2s10s has broken below the support of the well-established white support TL at .21 – a very bearish development. The 2Y and 10Y remain in precarious positions, with a potential plunge by the 2Y being the more ominous of the two.UPDATE: 11:24 AM

VIX dropped through its SMA200 and is about to close its gap at 15.92 — an important test for the bears. Note that even though CL has pushed back up through its SMA200, it is also backtesting an important channel midline. This is quite important to watch, as it was CL’s push above its SMA200 (and departure from the 2015 analog) which pushed SPX up above its .886 to new highs. If the move ultimately fails, SPX will be under increased pressure.

The other factor which assisted SPX’s breakout was USDJPY — which broke out of its falling white channel which was pointed at the lower bound of its triangle.