If you’re looking for a scapegoat for this morning’s slide, look no further than USDJPY.  After reaching initial channel support on the 24th [see: Jan 24 Update on USDJPY] it slid down for a near tag of the .886 retracement at 108.16.

Instead of a nice, big bounce back above the channel bottom, however, it appears to be coming back for more.  ES, which finally saw its rising white channel break down yesterday, is not amused.  It has now re-entered the rising red channel from which it broke out on Jan 22.Almost all of our currency pairs, commodities and indices have landed right where we expected. But, they have yet to take the next step.

After months of almost immediate, V-shaped recoveries, traders might be forgiven for wondering “where’s the bounce?”

continued for members…

SPX should test its SMA 10 on the open.

Everything else is pretty much right where expected.  USDJPY came up a little short (108.27) the other day.  Maybe it’s going back for the actual tag of 108.16. EURUSD is still lingering at our initial target, with our secondary target of 1.2597 still waiting in the wings.RB is dropping towards a backtest…at least.CL has further to go, but is doing the same.And, VIX is testing December’s highs.TNX is waiting for guidance from the FOMC, which starts its two day meeting today.And, GC is getting a lift……from DXY’s continuing slump. UPDATE:  10:00 AM

SPX is dropping through its SMA10, as ES did 12 points ago.

A reminder of key ES levels:It’s not helping that CL and RB’s losses are accelerating.  Initial targets are dead ahead. VIX is sneaking up on its 16.13 target.  Note, however, that it’s already broken out of its rising white channel.  If TPTB decide to hold SPX/ES SMA10s, the .786 at 15.41 could be the top for VIX.

For those who stayed long or resumed a long position this morning, consider some stops at this level just in case.  I needn’t remind anyone of the potential for a slapdown at this point.

The more aggressive trade would be to short here, but go long on any push through 15.41.  The middle ground: use 14.58 as your stop and/or short signal.A reminder of how this morning’s drop fits into the big picture… SPX just dropped back into and tested the midline of the small, white rising channel.   That, in turn, is still above the midline of the larger white channel…

…which is in the top quarter of the huge rising purple channel.  The nearest major Fib support is the white 2.24 at 2703.62 — about 135 points (4.7%) below current levels.UPDATE: 4:50 PM

SPX closed 4 points off its lows for the day.  It fell through and backtested its SMA10, leaving it in good position to flesh out the rising white channel at the gray .618 at 2808.16.  If the channel breaks down, then the larger white channel midline comes into play at the SMA20 at 2788.10.

Even though SPX fell sharply, its SMA10 rose from 2826 to 2830.86.  So, it’s even more underwater” than it was at the open.  SPX and ES are now the same distance from their SMA20s – 2789 and 2788.  So, that makes for a nice downside target if SPX’s rising white channel breaks.  And, it’s pretty darned close to ES’ red channel bottom.

After that, it gets a little messy.  ES has an important backtest at 2773, which would be 2773 on SPX — nothing all that important in the vicinity.  Below that, however, the white 2.24 at 2703.62 remains very interesting.  It would be a helluva drop from here: 117 points or 4.1%.  A drop that big would probably mean CL and RB completely break down and EURUSD and DXY do the little overshoot we’ve been talking about.

VIX argues for an additional drop, but probably not a 117-pt one.