Futures were on the path to tag an important Fibonacci extension this morning when someone committed the cardinal sin of checking the headlines.  The 6-point gain turned into a 2-point loss, causing VIX to swing into action. Can its sudden 7.63% plunge compel algos to prop up stocks yet again?

continued for members…

The bigger picture shows lots of support here at the falling white channel midline and former red fan line which broke down in the winter of 2019 in order to keep that rally alive (it wasn’t able to.) It should hold…unless the algos go completely off the rails in which case the purple fan line at 14ish and the 11.42 former low are all that stand in the way of VIX finding its way to the purple channel bottom at 8.24. This means CL and USDJPY must take up the slack if ES’ 1.618 is to be tagged.

SPX’s already has been, of course. And, it continues to look like it’s breaking out of the rising yellow channel. So far, CL is accommodating. Remember, this is pretty commonplace on EIA inventory days. The next report is due out at 10:30.

We also have Powell speaking at the Washington Economic Club at noon where he’ll no doubt repeat his mantra that the economy is stunningly healthy but also so incredibly bleak that the Fed won’t even think about raising rates until SPX 5000 and, BTW, there is no need to be concerned about soaring inflation.

The event can be seen live HERE.

The Fed’s Beige Book is due out at 2pm – usually a non-event.

UPDATE:  3:55 PM

It’s a start, but ES couldn’t even manage to break down below the purple TL – a tiny loss on the day. And, VIX is going to close below the SMA10. So, though I’m tempted to believe it’ll break free, there’s not enough to instill confidence.

It’s interesting that USDJPY dropped just enough that the backtest risks turning into a failed breakout. Remember, the last time a breakout failed was in Feb 2020. I’ll admit that this gives me a little more encouragement re the downside…