Mid-day Update

Corrective bounce limit being tested.

Not connected to the intraday gyrations is a corrective bounce limit at 2134.00. It may be probed intraday, so long as any probe above it is isolated to a timing window.

Interestingly, it was probed by a knee-jerk reaction’s spike up to 2143.50 on dovish comments from a dovish Fed speaker.  That same spike fulfilled the 2141.25 bias-up target. Its reaction down overlapped the 2136.00 bias-up signal in time to invoke the grace period. triggered late no-bias triggered at 1:30.

Late no-bias after fulfilling the bias-up target already reacted down to 2130.75, suggesting that buying pressure is ending. That doesn’t necessarily mean reversing down immediately — the afternoon bias environment is not an optimal time for trending.

Overbought RSIs at the 2143.50 high don’t require a retest for being a news reaction, but a retest has room for noise up to 2145.00 or 2147.00. And back above 2136.75 has signaled that retest underway.

Exiting the bias environment or entering the final hour back under 2134.00 would likely be followed by retracing much of today’s rally. Potentially, all of it — if not today, then probably overnight. Closing above 2134.00 would require gapping down tomorrow to confirm the trend has reversed down.

Not getting better.

The noon hour low was so oversold that it would either bounce to refuel, or else capitulate. The market seems to have chosen the latter path. Making it more bearish is that the market didn’t have to choose the more pessimistic path. This morning’s bias-down signal had remained influential throughout the noon hour as did Wednesday morning’s bearish Pivot Reversal. The air pocket down to the 2140.00 area was fulfilled.

Consolidating narrowly at or above 2140.00 for an hour broke lower into the bias environment. Although probed lower, the 2137.50 bias-down target was touched by the 1:20 bar to avoid renewing the bias-down signal. That doesn’t change whether this is a bias-down environment — it is, and fresh lows are now attacking 2131.00, which is 41 points under yesterday’s cash session close.

I’ve been commenting in the chaRTroom about this being a very bearish pattern. Today’s price action has been a continual series of lower lows and lower highs. The gap down back to last Thursday’s close has extended below the multi-day consolidation that had developed into last Thursday. And just look at the damage being done to the bigger picture.

Today will not form a bottom, and Monday will be unusually vulnerable to repeating today’s pattern of gapping down and extending sharply lower throughout. Having said that, entering the noon final hour back above the bias environment’s 2138.00 high could get squeezed up to 2150.50.

Rejecting yesterday afternoon’s bounce now awaiting a repeat.

This morning’s 2167.25 bias-down target has become “unfinished business below.” The bias-down signal was no more productive after triggering at 10:15 than before it. So, invalidating the bias-down signal required recovering the 2180.50 bias-up signal as the bias environment was lapsing. And the morning’s bounce only reached 2177.25.

Recovering 2176.75 would still start to signal momentum reversing up. The morning’s bias environment only pierced it by a tick. And now this morning’s 2173.25 bias-down signal is being retested. It’s not exactly giving way, but yesterday’s 2170.50 low has been tested enough that even obligatory support is unlikely.

I’m tracking the timing of a next downleg, assuming there is one. Recall that yesterday afternoon bounced throughout, and its rejection was delayed until pre-open. Rejecting this morning’s bounce this afternoon would suggest the market is becoming more pessimistic. The depth and slope of its downlegs would be likely to increase simultaneously.

If only retesting yesterday’s low was sufficient to end selling pressure, then this morning’s bias-down signal shouldn’t have triggered. At least its target should have been rejected. But while a delayed recovery wouldn’t be sponsored by strong hands, it could still be a substantial detour, so be sure not to get caught short on a big bounce.

Morning forms Pivot Reversal setup.

Yesterday’s last-minute surge had originated too late to be sponsored by strong hands. It wasn’t bullish. It may have been bearish, by making a gap down easier, and easier to absorb.

Absorbing a gap down is bearish?

Absorbing the gap down was reversed it to probe back above yesterday’s late high. That’s not bearish, unless rejected. And this morning’s recovery was rejected.

Exiting the bias environment under the open’s low at 2180.50 has trapped weak-handed buyers. This setup often launches a reversal. Entering the noon hour under the bias environment low would have been helpful, but that didn’t happen.

The noon hour did probe fresh lows down to this morning’s 2177.75 bias-down signal. Its reaction up to 2182.00 has avoided triggering bias-down again today. Back above 2182.00 could retest this morning’s high up to 2187.00, just as noise. Sellers are already entrenched.

Back under 2170.00 would signal the decline is already resuming. At this stage, that could be very bullish, instead.

Support test produces resistance test.

I noted during the pre-market Tour that direction wasn’t the only question to answer this morning. Trending, at all, was still not assured. In fact, this morning’s drop to the bias-down signal has recovered to retest its opening peak, and Friday’s highs. Trending beyond Friday’s range has yet to develop — let alone, to be indicated.

This morning’s 2182.00 bias-up signal held its test and tested its 2174.25 bias-down signal. Now this afternoon’s 2183.50 bias-up signal has been tested, and back under 2180.50 would start to signal another downdraft underway.

The range need no t break either way today. But trending after the bias environment start lapsing would be more credible for extending.