Contagion Fears Spread to Europe.

VIX is spiking, stocks are sinking. Now what?

Technical Edge — 

• NYSE Breadth: 70% Upside Volume

• Advance/Decline: 76% Advance

• VIX: ~$27.50

The PPI report came in soft and the market saw a bit of an uptick on that note. And while it is a positive, there are bigger fish to fry right now (not to mention the in-line CPI report from yesterday). 

When the VIX rallies 50%+ in two days, bond yields go haywire, gold jumps and the regional banking ETF suffers a peak-to-trough decline of 31% in a week, it will take some time for the system to absorb this extra wave of volatility. 

S&P 500 — ES 

The ES overshot our 3947 to 3960 sell-zone by 10 points, but it was the right location to be a seller. Look, when the VIX is $25+ the ranges are going to be extended a bit. 

Of course, no one knew that we’d wake up this morning and European banks would be the problem. But the charts outlined why this was resistance. It was the 50% retracement, 200-day and 10-day moving average and the February low. 

Take a moment and observe how much overhead support is now building between 3950 to 3975. 

The Trade: 3880 is critical. It’s been support lately and it’s last week’s low. Weekly-down would open the door back down to 3840, (the top of our support zone between 3820 to 3840). 

If we lose 3800, 3770 to 3775 is in play — the 61.8% retrace of the rally off the Oct. low. 

On the upside, 3910 is resistance. Followed by 3933 and 3950-3970.

SPY