Mid-day Update

Proximity to weekend, and to targets, suggest keeping one eye open.

Holding a test of this morning’s 2492.25 bias-down signal had put into play an offsetting test of its bias-up signal. The pre-10:15 2512.00 was never exceeded to confirm. And the 2478.25 bias-down signal was recovered coming out of the bias environment. So, the upside objective became moot.

And the morning’s drop extended down to 2463.25. That’s within 10 points of the decline’s next major objective.

It’s too late to fulfill an objective and then to launch a recovery. Perhaps a corrective rally — especially considering the proximity to this weekend’s illiquidity, which is largely in practice a 4-5 day weekend despite Monday’s shortened session. Has everyone thrown in the towel on the mythical, proverbial Santa rally so that it can finally begin?

Before we can plot out a rally’s targets and trajectory, we need to confirm the decline has ended. And we can’t. The recent excessive optimism warns against viewing bounces prematurely as recoveries. Bearish WedEX scheduled for tomorrow afternoon suggests otherwise, too. But we do want to be aware if the decline is waning, and it just neglected to trigger bias-down.

Noon hour’s high has corrected.

This morning’s test of 2574.00 was corrected down to yesterday’s 2562.50 late surge. The rally resumed to fresh highs during the noon hour, attacking this afternoon’s 2581.00 bias-up target.

And now this afternoon’s 2573.75 bias-up signal has failed to trigger. This is a no-bias environment, already having tested its bias-up parameters. News is coming — the FOMC policy statement at 2:00 and then the Fed Chair Q&A a half-hour later.

Testing the bias-up parameters would seem overly optimistic, if not having been retraced in time. Resuming the rally is possible, and at least a retest of 2581.00 is likely. Actually, a lot of volatility is likely. The pattern remains vulnerable to resolving down since the open did not form a solid base.

Three distinct rally efforts, each retraced.

Last night’s initial bounce up to 2569.00 was retraced to unchanged. Another overnight bounce extended through the open to attack 2578.00. It was retraced, too. Now the noon hour’s bounce up to 2576.00 has been retraced — largely, not entirely.

The post-open bounce’s retracement filled the open’s gap, which suggested wide-ranging sideways choppiness would develop. No further down, no new rally, just a wide range. Which the noon hour’s bounce fulfilled.

The last bounce also tested both afternoon bias-up parameters. They were rejected by triggering late no-bias. The setup’s likely test of this afternoon’s 2558.00 bias-down signal is being met now, and probed down to 2554.00.

Extending down further is possible, but more appropriate after the bias environment comes within view of lapsing, when it could more easily start the ball rolling (slowly) toward a late-afternoon decline. The decline could resume today, although it won’t be very easy on the afternoon ahead of tomorrow’s FOMC policy statement.

Post-open bounce gives decline a lot of leeway.

Gapping down to the morning’s 2593.75 bias-down signal and extending to 2571.00 had apparently gotten ahead of itself. Its reaction had room up to the morning’s 2606.50 bias-up signal while still being likely to resolve down — rewarding sellers for absorbing the post-open bounce — as much as punishing the bounce for not gaining traction .

The bounce got to within 1 point of 2606.50. It was retested at noon, and held. The noon hour trended back down to eventual probe the morning’s low by 1 point of 2569.50.

This afternoon’s 2588.00 bias-down signal has triggered, and its 2580.25 bias-down target is exceeded at 1:20 to renew the bias-down. Its next lower objective is essentially 2555.00, although probably encountering 1-2 support tests along the way down.

Not yet extending down during the bias environment wouldn’t be bullish, unless the window were exited back above its 2580.25 bias-down target. That could produce another oversold corrective bounce ahead of tomorrow’s FOMC meeting. But no bottoming pattern is yet in sight.

Morning’s support being tested.

The 2625.00 post-open low was well above the overnight low.

But it held a test of Tuesday’s late low. And so did a mid-morning drop, after an interim bounce attacked 2641.00. Oh, and this is Friday.

Usually, Friday’s sponsorship is evident by the morning’s end. If trending is attempted, then either it is successful, or it is not. And if not, then that sponsorship is done for the day. It’s a function of Friday Factors, which are behaviors specific to two days of impending illiquidity.

So, breaking under 2625.00 as this morning’s bias environment lapsed was unusual. The dip tested 2610.00 and avoided triggering this afternoon’s bias-down. Which hasn’t prevented a fresh low from testing 2607.50.

The late decline is credible, this being a Friday. If the decline is valid, then it could be substantial — not only down to this afternoon’s 2603.00 bias-down target and Monday’s 2588.00 low, but potentially much lower into and out of the weekend. Absorbing the late extra dip back above 2622.00 would still have potential back up to positive territory.