Mid-day Update

Bounces still failing.

A choppy morning held multiple tests of the 2123.25 bias-down signal. One of the tests was timed appropriately to trigger no-bias, putting into play an offsetting test of the 2132.25 bias-up signal. Despite diving back down to 2123.25 as the bias environment began lapsing, the bias-down signal held again. Now 2132.25 becomes “unfinished business above.”

That will have to wait. Chipping away at 2122.50 through the noon hour kept open the door to attacking overnight lows. Now late bias-down is triggering under 2121.25.

Not yet recovering this afternoon could extend down and resume last week’s declines. Either fulfill this afternoon’s 2116.00 bias-down target and then rally sharply, or else leave it outstanding by already recovering the 2125.00 area. Otherwise, trading deeper would be more durable, next targeting 2105.00 and 2095.00.

Retracing back to yesterday’s highs.

Testing and exceeding Wednesday’s 2139.50 prior high at 9:45 had put into play the next higher objective at 2144.00. Renewing the bias-up signal above its 2136.00 bias-up target at 10:15 had put it into play, too.

It was attacked to within 3 ticks, which is close enough to neutralize its attraction. RSIs diverged negatively. Potential to 2150.00 was cut short. Perhaps it was hawkish comments from BOE’s Carney that sent price down sharply.

The bias environment began lapsing at 11:30 back under its 2136.00 bias-up target, probing under its 2131.00 bias-up signal. That action would have put into play offsetting tests of both bias-down parameters, if done through 10:15. Doing it through 11:30 does at least undermine that upside sponsorship.

There’s no particular downside requirement, as this action would have triggered through the open. Yesterday’s 2126.25 cash session close has only been attacked to within 2 ticks. But this is Friday. And not quickly rejecting the late-morning slide for being a temporary correction would make recovering later much less likely.

Already, the decline has extended 3-minute RSI diverging positively twice. Extending down just once more without an interim bounce would suggest the morning’s drop is about to extend substantially. Avoiding the afternoon bias-down — preferably, triggering bias-up — may be the only way to avoid melting down into the weekend.

Corrective bounce, or budding recovery?

The open’s test of 2108.00 was recovered through the morning’s bias environment, back to the 2118.00 open. It was too late for that to qualify as recovering the dip to 2112.00 to isolate sellers. But it was enough for entering the noon hour above 2121.75 to suggest as much.

The noon hour’s entry was still testing 2118.00, so the setup remained alive, but needing more validation. Attacking the 2125.25 “higher prior lows” to within 1 tick during the noon hour does not qualify. But now triggering the afternoon’s late bias-up signal above 2122.00 at 1:30 can exit the bias environment above 2125.25 to point momentum up.

Late bias-up actually puts into play 2127.75. That’s still representative of resistance at “higher prior lows,” and potentially the peak of a corrective bounce.

So, there is an attraction above in-play. It has potential to produce something bigger, but not durable since there is “unfinished business below.” And back under 2120.50 would signal momentum reversing down. Fresh lows targeting 2105.00 and 2095.00 would be in-play.

Low-volume session ranging narrowly.

Volume is already depressed from lower participation today due to the Yom Kippur holiday. Volatility has also been inhibited ahead of this afternoon’s impending FOMC Minutes release. The morning’s range was defined by its 2126.50-2135.00 bias signals. And the noon hour’s high came within 1 tick of this afternoon’s 2137.75 bias-up signal.

Now the FOMC Minutes are released. Its knee-jerk reaction up pierced 2137.75 by 2 ticks before reacting down sharply to 2133.00. Any lower would signal the balance of the afternoon was likely to trending down.

There’s otherwise no requirement to rally in place of declining. The balance of the session is equally vulnerable to only ranging sideways into the close.

Nothing bullish about this relentless slide.

At least a reaction to news offers the opportunity to price in the catalyst. Regardless of wide disparities among perception of that value, there’s something to value. And there’s a sentiment that can play out.

A reaction to bad news is different than price simply collapsing. Which is what is happening today.

None of today’s various news is creditable for today’s drop. Not for its relentlessness, trending down through every timing window. Not for its damage, breaking under “lower prior highs,” a gap, and prior lows. And not for its timing, immediately following a probe of prior highs.

Notice the one element I did not mention: Price. Price is relative to range, and is otherwise irrelevant. In fact, today’s drop isn’t that substantial compared to the range that it’s probing. This is even more bearish than not having a scapegoat, since there’s plenty of room to expend more selling pressure.

Currently this afternoon’s 2125.25 bias-down target is being tested. Late no-bias had triggered, by the grace of a single tick and a single minute. A more decisive no-bias would require recovering at least to 2131.00. Still possible, although oversold RSIs at the low would undermine the durability of any more upside than that. If at all.