Mid-day Update

Yellen reaction triggers extra surge.

This morning’s bias environment exit absorbed a test of 2027.25. It later served as the inflection point to a 7-point surge triggered by Fed Chair Yellen’s remarks. That extended during the noon hour to touch Sunday night’s 2039.75 high.

12-points into positive territory. Quite an improvement from this morning’s 9-point probe into negative territory.

But negative territory and 2027.25 weren’t recovered until after the bias environment had lapsed. Extending higher later is likely to be retraced entirely.

The noon hour’s reaction down from 2039.75 touched this afternoon’s 2033.50 bias-up target as support. A buy signal was triggered back above 2036.25 targeting the high’s retest up to 2041.50. Back under 2033.50 would target 2029.50, and potentially lower.

Corrective bounce potential fully tested.

Corrective bounce potential up to 2020.50 was realized fully. Every bar printing above it by as much as 1 point up to also overlapped it. All of which developed during the bias-down environment, which was exited back under its 2019.25 bias-down target.

There is no bearish reason to bounce higher. Sellers don’t require further refueling, downlegs don’t need higher retracements. So bouncing any higher would marginalize sellers for the day.

Meanwhile, the bounce developed entirely during the bias-down environment. Its sponsorship was weak-handed. Being just hours away from the 3-day holiday weekend, weak-handed sponsorship may continue to find less opposition. So, a bigger bounce would marginalize sellers for the day.

Just retesting the high wouldn’t qualify as a bounce. Piercing the bounce’s 2021.50 high wouldn’t necessarily be a bigger bounce. Its retest could still hold. Having said that, and having reacted down already to 2016.00, just delaying the decline’s resumption to its 2009.00 target would undermine the downside, anyway.

Noon hour entered at lows.

SPECIAL NOTE: MARKET WRAP WILL BEGIN AT 3:30PM ET, AND I’LL BE AWAY FROM THE SCREENS BY THE CLOSE.

This morning’s noN-bias environment was exited at its 2029.25 bias-down target. The target was never in-play, but it is nevertheless support. And its test has reacted up to test this morning’s 2034.50 bias-down signal by 2-3 ticks.

It is still resistance, and this is now the noon hour.

This is the lower-end of a multi-session range, the relatively narrow range that has been suggesting the rally may be done. Buyers are clearly complacent, but pushing price to the range’s lower-end doesn’t yet prove sellers are retaking control.

There’s room up to this afternoon’s 2039.00 bias-up signal before suggesting sellers aren’t retaking control. This being Wednesday afternoon ahead of a 3-day holiday weekend, not yet breaking the range today would be unlikely to break the range before Monday — making this the range’s lower-end. A break lower would essentially target 2009.00.

Bias-up target met already. Two bearish setups forming.

Before I go any further with the downside risks alluded to above, I should offer a reminder. Trends, especially rallies, are survivors. They find ways to survive that continually surprise me. One general theme is quite common — when appearing to be its most vulnerable to reversing, it finds the resolve to resume and extend.

This may be one of those times.

The trend is vulnerable because there is no “unfinished business above” attracting price higher. That, alone, is not a sell signal. It’s not like support is being broken, which can attract sellers. Resistance is being probed, which can attract buyers. This instance, however, has other challenges:

— unfinished business above is being neutralized almost as quickly as it is created (most recently this afternoon’s bias-up target that was met already at the 1:20 bias timing window),
— target’s and resistance are holding through relevant timing windows (e.g. this afternoon’s 2045.75 bias-up target),
— RSIs diverged negatively into the highs,
— the two-day ranging at trend highs now trying to probe resistance that has held through relevant timing windows,
— much buying pressure was expended to prevent this morning’s gap down which then attracted weak-handed buyers,
— a potentially bearish setup is forming that targets at least 2042.75, potentially 2037.75, and in the latter case possibly also new session lows.

Ranging around this afternoon’s 2045.75 bias-up target blipped-up to 2047.50 and suddenly its reaction down is testing 2044.50. Trending down immediately may be difficult since 1-minute RSI just hit its support at oversold. That can work itself out by firming momentarily.

That momentary probe is where rallies often revive themselves. Undeterred by my above list or by a list 10 times longer, defenders can appear from out of nowhere. A rally that can ignore so many bearish elements and extend higher anyway probably won’t be too long from printing new highs.

Either way, this area is unlikely to be visited for much longer. It’s too dangerous.

Bullish WedEX repeats Friday afternoon’s pattern.

Friday afternoon had been entered in a slide from the morning’s recovery. Like its morning’s recovery, Friday retraced the entire slide into the cash session close.

This morning’s opening surge was productive, testing the 2041.50 bias-up signal. But its reaction down slid to 2032.50. Like Friday afternoon’s slide, it was all recovered — at least, to within 1 tick of the morning’s high.

Bullish WedEX doesn’t necessarily produce a rally, not when it’s called on to absorb downdrafts. Having said that, absorbing a downdraft on Friday afternoon usually produces an aggressive rally on Monday morning.

What else about Friday will be duplicated today? Notice that its unremarkable range has only been pierced on either end, by another otherwise unremarkable range. Having failed this morning’s attempts to break the range, the afternoon isn’t required to do anything new. By that same token, trending this afternoon — especially if begun after the bias environment begins lapsing — could extend through the close.