The daily SPX hints clearly to a drop out of the triangle, which has it's support at 890/900. A close below will trigger a drop to 770/800 and that is due shortly as we will have entered wave 5 down of wave 3. The moves of the VIX confirm the picture as does almost any index I can find around the world. In SEQ counts, we are 7-8 counts away from the low, which points pretty much to our election day scenario or 2 weeks. Volume is also picking up today but still far away from the levels of the last weeks. Next week we can expect even a countermove from a lower level since a rate cut by the FED (likely also other central banks) is warranted. The question is how much FED Funds imply 25BP which would rather cause a sell-off? They need to do 50BP to give market support but more important is Europe, since they have a flat curve and banks can not generate income by the yield curve (ideal is if short term is at least 100 BP lower than longer term Bonds). The reason why the VIX came down so sharply on Monday was due to the expiration of the OCT options yesterday. They wanted it down to 50 - guess that was the reason we had the wild opening up to 80 even this morning.
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