It’s surreal, watching our “leaders” debate how many deaths are acceptable and whether workers and children should be sent back into harm’s way.  Only a few weeks ago, we all agreed upon the need to flatten the pandemic’s curve so we could prevent a surge from overwhelming our medical system. Now, the debate is about flattening the soaring jobless claims and preventing the country from falling into a depression.

I wish I knew the answer. I don’t. But, I’m fairly certain that if we emphasize the economy to the exclusion of medical issues, it would all be for nought – especially for the dead.  As the country reopens and COVID-19 cases and deaths resume their rise, we’re all canaries in the coal mine.

Futures are off sharply this morning and appear likely to reach our next downside target either today or tomorrow.

continued for members…

ES has formed a falling wedge that suggests tomorrow rather than today for the drop to 2700ish. But, these things have broken down before.

The bigger picture:Remember, SPX has already pierced its May 4 lows and has a different 2.24 than ES.

As we discussed yesterday, it’s worth keeping an eye on AAPL – which has seen its red channel break down but has yet to push below its white channel top backtest.Likewise, it’s important to note that DJIA has dropped back below its 2.24 and is testing its SMA50.

As expected, VIX broke out of its falling wedge/channel and is contributing to the downside for a change. USDJPY is waffling back and forth across the little red TL and between the SMA10 and SMA20.  When stocks are done falling, look for it to resume its breakout. If stocks are going further south, it will drop back below the SMA10 and potentially back into the falling white channel toward the .618 at 105.20. EURUSD continues to fall and is still testing the red TL and channel line……while DXY has pretty clearly broken out.Oil and gas are still on the sidelines, pegged against upper resistance but not breaking out. 10Y yields have broken down slightly, meaning that ZN is that much closer to breaking up to 144’195. The 2Y is back below 17 bps and the 10Y has declined to 62 bps. This leaves the 2s10s back in a bearish alignment based on the breakdown below the yellow and white trend lines, though not the very bearish alignment of a breakout.UPDATE:  10:55 AM

So far, ES has stuck very closely to its falling wedge. If this continues, this should be the extent of this morning’s bounce and ES will settle lower to 2728 overnight or 2703 at tomorrow’s open. What complicates things a bit is that tomorrow is OPEX – typically not the day we see plunges.

UPDATE:  1:30 PM

The algos have taken over, with ES pushing up against its H&S neckline and VIX breaking down through what had been support.  This is much more like the ramp one would expect in the lead-up to OPEX.  It remains to be seen whether it will hold.

UPDATE:  3:25 PM

ES has reached the top of a line parallel to the very clearly laid out lower red TL – in other words, a potential channel at a level where it also backtests the SMA15 200.  This would be the next logical place for a reversal. The key is getting back below the neckline at 2825.60ish.SPX has reached a potential wave 1 horizontal resistance.I don’t see any particular reason for VIX to reverse here other than it correlates with ES’ potential reversal.