Market balancing on a pin

After several weeks of increasing divergences, the large caps started to roll over. The picture is not pretty.

And the small caps (IWM):

If the support breaks, there is not much resistance below.

The narrative is that oil prices are hurting corners of the economy. And this is true: energy sector is taking in beating. The baltic dry index (BDI) is down -63% yoy as low oil prices eliminate the incentive for slow steaming. At these levels, cash flow is not enough to pay for the loans for the drillers and shippers. In the leveraged economy, it does not take much to stir a storm...

Watch for VIX and high yield:

VIX surged to 21+ which is extremely high considering that market is less than 5% from the high. Sell volume was moderate but not near capitulation level. So while the vix is high, I take it as an indication of investors seeking protection but not wanting to sell their stocks. While it is possible that market may bounce up here (especially if the price of oil stabilizes) most other indicators point to lower next week.