What a difference a week can make. This time last week ES had made a bullish looking recovery over 1300 and most analysts were expecting a rally. A week on ES is down almost 140 points, the Vix touched 40 (more or less) on Friday and the weekend was most notably marked by S&P downgrading US debt from AAA (expected) and riots in London (unexpected). The riots in London, strangely enough, seem to have been sparked off by a known criminal being killed in a shootout that started when one London policeman accidentally shot at another London policeman. It isn't yet clear whether the dead known criminal was armed or, if armed, whether he ever drew his weapon. My father always used to say that policemen here had so little experience with guns that when they were armed, they were a serious danger to themselves and innocent bystanders.

Be that as it may I have a possible declining channel on ES that is suggesting that we may see another test of broken support in the 1215-1220 area today or tomorrow. I was suggesting on Friday morning that ES might peak there which it did. The H&S target on SPX is not yet made and if we do see a retest of the 1215-1220 area I'd be seeing that as a sell opportunity:

it's obvious that USD bottomed out a few months ago, and I think what we are seeing here is the most pathetically weak USD rally that I can recall. EURUSD is still trading in a range around the 1.427 area and broke up from last week's declining channel at the open yesterday before declining back to the 1.427 area again:

I think gold has replaced USD in the flight to safety trade this summer along with Yen and bonds which are the other usual flight to safety destinations. It is a mark of quite how weak this rally on USD has been that it has failed to make much headway against embattled EURUSD. Gold has broken up from the rising channel of recent weeks and is consolidating above it. I'm leaning towards a reversal here but we might instead see a break up from the channel with confidence:

I'm having trouble buying a bear market here. Government credit is still too good, austerity is only hesitantly beginning, corporate earnings have been so good that the P/E ratio here (reported earnings) is the same as it was in March 2009. Perhaps, but this could just be a short term panic. 30yr treasuries are now in an area where we would normally start looking for a high:

NYMO is very much in an area where we would normally be looking for a low or at least a serious bounce:

We've just seen a golden cross on Vix (daily 50 and 200 SMA cross), which is bullish for Vix, though the performance of these over the last few years have been hit and miss. There are four golden crosses apart from the current one on this daily 6yr chart. The first two were in the last bull market, and were failures as equity shorting signals. The third was in September 2008 and was a great success, and the last in May/June 2010 I'd see as a marginal success:

I'm leaning towards seeing a low with at least a decent bounce this week, though I don't have anything in the way of a reversal pattern on any equity index. The Fed is meeting tomorrow and it will be interesting to see what they come up with after the turmoil of the last week. Will they announce QE3 then or later this month? I think they might to try and head off recession in the US and panic in the equity markets. If so the outlook for USD and bonds particularly would look grim but equities might get another lease of life for a few more months of bull market.