Mid-day Update

Position of strength invalidated.

Closing yesterday above the morning’s 2721.00-2723.25 highs had indicated the overnight and morning’s sponsorship was done. Not that the pattern would allow yet for a durable bottom, but a corrective bounce was likely.

Other factors had made the first reaction likely to be down, and then the rally could resume. Backing-and-filling held its earliest possible target and recovered enough in-time to get a benefit of the doubt. But the decline has only persisted since.

Actually, the lowest potential pullback target at 2701.50 is being tested now. And RSIs are essentially diverging positively. It’s still a bias-down environment, but rally could emerge.

Otherwise, the invalidation template will be winning out. A much more substantial downleg compared to Tuesday would be underway. And the decline from recent highs will have resumed.

Rallying sharply out of morning’s low.

The initial collapse down to 2692.25 was recovered to a minimum 2711.00 bounce target, and then its next higher attraction at 2715.25. A 61.8% retracement was recovered to resume the rally, which has extended up to 2736.25.

The afternoon’s 2713.00 bias-up signal triggered easily, along with renewing bias-up above its 2720.00 target.

Which allows a reversal room down to 2713.00 during the bias-up window. Lower, later. Currently, a pullback is testing the open’s 2721.00-2723.25 highs as support.

The resolution to this dip is very important.

Closing above the open’s 2721.00-2723.25 highs would suggest that a near-term bottom has formed. This would be more credible had this morning’s low formed a Double Bottom. That could be provided tomorrow, from the position of strength of having closed above the open’s highs.

Otherwise, closing back under the open’s highs would suggest the decline remains intact. That’s not at all unlikely, since the decline has already consolidated, and immediately beginning another consolidation isn’t usual behavior.

In either scenario, closing just above or below 2721.00-2723.25 is unlikely. Holding its recovery, or not, should be decisive — whether at today’s close, or through tomorrow’s open by proxy.

Bearish influences have lapsed, but market hasn’t recovered.

Bearish influences are standing out. The bias environment was exited in decline and much closer to its morning lows, ending the bearish WedEX influence. The morning lows were attacked more closely during the noon hour, and haven’t been recovered. This afternoon’s 2765.25 bias-up signal held its test to trigger no-bias.

Meanwhile, there’s nothing bullish about the session.

But the list of bearish influences is just potential. Or already fulfilled. None has created any further downside requirement. This afternoon’s 2754.25 bias-down signal also held a test to avoid triggering.

Breaking under this afternoon’s 2754.25 bias-down signal as the window begins lapsing would be credible for resuming the decline. Having delayed its resumption, trending down through the close would be likely. Not yet starting to decline remains vulnerable to another bigger bounce.

Morning bounce absorbed, bearish WedEX in-play.

This being a Friday, an afternoon decline didn’t depend on the open breaking lower. In fact, the market followed the bearish pathI outlined during the Market Tour and retraced its morning rally coming out of the bias environment.

Retraced, but not rejected. Buyers were absorbed, but the trend had not reversed down. Testing 2800.00 was retraced back under 2780.00, but yesterday’s 2786.50 noon hour high was still being overlapped at noon.

That leaves the ground fertile for launching another downleg, but it still needs to be launched. Perhaps it just was, triggering this afternoon’s 2783.25 bias-down signal. But only triggering bias-down, despite having probed 10 points under its 2777.00 bias-down target in the interim.

Now this afternoon’s 2783.25 bias-down signal is being attacked as resistance. Its test should hold, since the afternoon’s bearish WedEX is now influential. It triggered by proxy, so it’s not optimal, but it still gets every benefit of the doubt so long as 2786.50 holds as resistance.

Back above 2786.50 would start making an afternoon rally likelier. The bearish WedEX is sub-optimal and the bias-down target is met and held. Both are loopholes that Friday afternoon’s have a way of leveraging into a reversal. So, regardless of their likely influences, be aware of the potential for another rally.

FB, SLD, B-D, and more.

False Break.
Tuesday’s breakout from the Ascending Triangle above 2778.00 was likely to be a false break. It likelier objective at 2819.50-2823.00 held multiple retests through yesterday. An interim dip yesterday morning had stopped optimistically short of touching the Triangle’s upper-end. But now today’s 60-point drop is probing back into the Triangle down to 2756.50.

Session-long decline.
Price action into yesterday’s close had bounced, and the afternoon’s low had printed during the bias environment. So, gapping down to and/or through that prior low formed a “session-long decline.” The setup essentially says that all but one timing window will probe its prior timing window’s low. That exception is usually the noon hour, as it is today. The final hour should still probe under the afternoon bias environment’s low.

Bias-down.
The least influential, since its 2760.75 bias-down target is already met. And it’s being probed, which doesn’t contradict this being a bias-down environment. Having said that, exiting the bias environment above or below its already-met target would offer extra confirmation to the decline’s durability today.

Another ugly day tomorrow would be the closest analog to a 1987-style crash setup that we’ve seen in quite awhile. Not that a bounce Friday wouldn’t still be vulnerable, but extending down sharply Friday should attract more reinforcements than counter-trend sponsorship.