Mid-day Update

Gradual firming has become obvious rally.

This morning’s First Trade blog post pointed out the market’s seeming desire to greet this afternoon’s FOMC events optimistically. In fact, after the morning inched slightly higher and slightly higher from 1981.00 to 1986.00 and then to 1988.00, the noon hour’s exit has surged up to 1994.00.

So, this afternoon’s 1988.25 bias-up has triggered, and its 1995.00 bias-up target is in-play. That’s 1 point from the rally’s next higher objective above yesterday’s 1977.00 and 1985.00 targets at 1996.00.

Where the rally into yesterday’s high was probably more option expiration mechanics than optimistic sentiment, today’s extension can become extended more easily. Don’t forget that there’s the 2:00pm policy statement, and then the 2:30 Q&A with Yellen.

Bullish can mean there’s room for a pullback.

This morning’s noN-bias environment extended above its 1972.00 bias-up signal before the bias environment began lapsing. And it extended quickly. So quickly that this morning’s 1977.00 bias-up target was exceeded at the bias environment’s exit.

The noon hour extended even higher to 1983.75, where both 1-minute and 3-minute RSIs diverged negatively. Reacting down overlapped the 1979.50 bias-up signal within 3 minutes of 1:20 to invoke the grace period. The bias signal barely avoided triggering.

The expectation for probing above 1985.00 remains intact. It’s this afternoon’s bias-up target, and bias-up wasn’t rejected so decisively as to prevent one more fresh high. Back above 1980.25 would be credible for starting that move — above 1985.00 would target 1996.00 — as expiration’s influence seem one-sided.

But having come already within 5 ticks of fulfilling 1985.00 on the same leg that fulfilled 1977.00, beware of a deeper pullback. That’s still likely only to refuel buyers for higher highs, but the buying that’s not position-jockeying ahead of expiration is optimism, and that’s getting a little stretched.

Initial reaction down from resistance gets squeezed.

The open’s reaction down from the 1950.50 bias-up signal had dipped to “lower prior highs” at 1943.50. That ranged sideways back to 1948.00 through 10:15 to trigger no-bias. Having held a test of the bias-up signal, that put into play an offsetting test of the 1935.50 bias-down signal.

A sudden surge flipped that on its head. Rather than drop 13 points to the bias-down signal, the surge extended into a 13-point rally that tested 1961.00.

There was never a fresh post-10:15 low, so the offsetting test of the bias-down signal is moot. Exiting the bias environment at 11:30 above the 1955.50 bias-up target would invalidate it anyway.

Overbought RSIs at the high require its retest eventually. That can wait if 1955.50 is reversed through 11:30. The no-bias rally’s steep slope and origin is suspicious for being sponsored by weak hands. But holding above 1955.50 would let the overbought RSI be more attractive than anything below.

Rally back within proximity of being more than a corrective bounce.

I pointed out before the open that the overnight rally had held precisely at a 61.8% retracement of yesterday’s intraday decline. That natural resistance launched a reversal back down to the bounce’s origin. And through it.

Having probed under the bounce’s origin — i.e. yesterday afternoon’s low, if not also under the overnight low — recovering above their interim high would indicate more than a corrective bounce.

And the overnight high’s 1957.75 corrective bounce peak has been attacked to within 2-1/2 points at 1955.25.

That attack is during an invalidated no-bias environment, which broke above the 1944.75 through 1:30, after failing to trigger it at 1:20. Exiting the bias environment at 2:30 above its 1949.75 bias-up target would earn the late buyers the same credibility given to Tuesday afternoon’s late buyers (who sponsored a 40-point rally).

But exiting the bias environment under 1949.75 would undermine buyers. And back under 1946.75 would start to signal momentum reversing down. Other support could prevent resuming yesterday’s decline, but the recovery would have become very suspect.