Mid-day Update

Optimists learning at a glacial pace.

At least this morning’s gap up reversed down immediately. So, optimists are getting a little smarter. Not much, though. Friday’s gap was a little slower to reverse down, but not much. And prior gaps up had extended higher more and more briefly before reversing down.

Negative territory was probed earlier this morning than Friday. But not much. The bias environment had not yet ended today, but Friday’s drop dragged it out before failing.

There’s some sort of a pattern there.

The learning curve doesn’t advance simply by shortening distance between the usual inflection points. Rather, the curve stops repeating, and disappears altogether — replaced by a period of trending more consistently and at a steeper slope.

Unfinished business below at this morning’s 1899.75 bias-down target is now this afternoon’s bias-down target. Probing fresh post-open lows during the noon hour would start to suggest the pattern is shifting to post-optimism. Somehow rallying would suggest something much more substantial underway to the upside.

Range narrowing in on unchanged. Bad choice.

This morning’s s drop to 1924.50 fulfilled the offsetting test of its 1927.25 bias-down signal. The offsetting test of its 1921.00 bias-down target remains outstanding.

Reacting up through the bias environment’s exit and into the noon hour tested the morning’s 1942.50 bias-up signal. Its resistance held, as did the afternoon’s 1941.00 bias-up signal.

The afternoon’s 1928.00 bias-down signal wasn’t touched. This is a no-bias environment, and it begins lapsing at the bottom of the hour.  Not using that time for rallying away from yesterday’s lows would be vulnerable to resuming the decline when the bias environment lapses.

Probing only slightly into positive territory would be even more bearish, as it reflects last-minute optimism. Shallow optimism before two days of illiquidy doesn’t prevent resuming the decline as the bias environment lapses.

Gap-down buyers learning to get out sooner.

The 1948.50 open rallied 21 points to 1969.00. That’s bigger than yesterday’s post-open 17-1/2 point rally. But it’s weaker, in two regards.

First, yesterday morning’s gap down was bought almost all the way through the morning’s bias environment. This morning’s rally peaked at least 20 minutes sooner.

Second, while both reactions down ultimately extended back under their opening prints, yesterday’s probe came during the afternoon bias environment lapsing. Today’s probe under the morning’s low has come during the afternoon bias environment’s entry.

The latest sell signal triggered under 1963.25 before the morning’s bias environment began lapsing. It has already produced a 29-point drop to 1934.00. If sellers are being conditioned alongside buyers, then they’ll be increasing pressure —

— especially as the weekend’s illiquidity approaches exponentially faster with each passing minute. Steeper selling into 1932.00-1939.00 target area suggests the conditioning is complete.

Morning’s recovery has stalled.

Quickly surging through 1978,50 extended to within 3 ticks of this morning’s 1996.00 bias-down target. First dipping to 1973.75 would have been rewarded by a 1998.00 target. So, no big deal.

Except…

Dipping first and extending higher would have laid two bullish eggs: First, the deeper dip would have expended more selling pressure, while vesting more buyers with an interest in defending against reactions down. Second, extending higher would have created more room for absorbing a pullback without it gaining traction.

Stated another way, rallying immediately at the open was optimistic. Having extended higher into the bias environment lapsing, literally as much buying pressure as could be expended for as long as it could be expended, without that optimism gaining traction for its effort.

Triggering this afternoon’s 1984.25 bias-down signal could open the door to much greater selling as the afternoon progresses. The only reliable bullish scenario at this stage would be to avoid triggering bias-down.

Another deep pullback is recovering.

The open’s probe above 2010.00 had reacted down. A recovery retested 2010.00. And now another recovery is testing 2010.00. All following yesterday’s late surge to 2010.00.

This current bounce to 2010.00 comes after holding a test of the afternoon’s 1999.00 bias-down signal, which had narrowly avoided triggering. Actually, the bounce is 3 points above the bias-up signal. That’s “no-bias trending,” which requires being retraced, whether back down to the 2007.00 bias-up signal, or to the 1999.00 1:20 print.

Already, 2007.00 is being retraced. Back under 2004.00 would make 1999.00‘s test likely — and there’s no bullish reason in this pattern to retest 1999.00. There’s no requirement to test 1999.00, and back above 2010.75 would be credible for launching a rally leg.