Mid-day Update

Still rallying from this morning’s reversal.

This morning’s 2620.00 bias-down signal was tested down to 2612.25, and recovered in time to avoid triggering. That put into play an offsetting test of its 2638.25 bias-up signal. And it was tested before the first hour ended, when exceeding it would have renewed the bias-up. But it was still being overlapped.

The rally extended anyway.

If tested during the no-bias environment, the untriggered 2638.25 bias-up signal would be required to define the window’s upper-end, or else trending above it is required to be retraced. Both constraints could be invalidated if the rally’s sponsorship were to prove itself worthy — by exiting the bias environment above its 2646.00 bias-up target.

It was.

And having rejected the no-bias and its required retracement, the rally has only extended. The afternoon’s 2655.00 bias-up signal triggered and its 2662.00 bias-up target is being met now. The open’s shallow muted reaction to the Employment Situation report has leveraged yesterday afternoon’s pent-up pressure to extend sharply higher.

And now the bias-up target is being probed.

Welcome to Friday. Especially to Friday afternoon, and to the Friday Factors. Trending is difficult to start, and then difficult to stop. More to the point currently, exiting Friday afternoon’s bias environment above prior highs on a trending day is vulnerable to extending. Beware of reversal signals, or anticipate their reactions to be brief and/or shallow.

Massive recovery can’t afford to simply hover.

This morning’s drop eventually extended down to 2591.25. It was a retest of 2594.00, their interim bounce being the initial 2600.00 target. The target ultimately held.

An uptrending channel entered the noon hour up to 2610.00. Its reaction down was recovered by a surge that exited the noon hour at 2628.00. One more higher high into the bias environment at 2632.50 essentially fills the gap back to yesterday’s cash session close. The futures gap had filled already, having settled 5 points lower.

This is almost positive territory (basis cash). Any higher — not simply piercing or momentarily probing — would be likely to extend sharply higher on the day. The likeliest alternative is to reverse down sharply. Actually, reversing down is likelier than extending higher. Least likely is to range sideways into the close.

Back under 2625.25 (being tested now) would target at least 2607.00 today. Extending any higher would likely recover yesterday’s 2658.50 highs, and higher.

No morning rally, or downtrend.

This morning’s opening dip only came to within 1 tick of its 2642.00 bias-down signal. That didn’t stretched the rubber band tightly enough for a snap back up to its bias-up signal. But the gap back to yesterday’s 2652.00 cash session close was attacked to within 1 point.

Then another dip tested 2642.00, by almost 2 points as the bias environment lapsed. But it was too late to trigger bias-down. It was, however, late enough to extend down, but sellers lacked sponsorship. So another bounce is attacking 2652.00 to within 1 tick.

Anxiousness ahead of the 2:00 FOMC Policy Statement likely bears some responsibility for inhibiting trending in either direction. It may also be responsible for preventing a morning probe above yesterday’s highs. That inhibitor will soon resolve, and the door remains open to fresh highs.

Fresh highs aren’t required, and they’re not required to extend or even to be maintained. Regardless of fresh highs, back under 2645.00 would more likely launch a retracement of yesterday afternoon’s rally, at least to 2635.00.

Fresh lows testing critical support.

Renewing this morning’s 2635.25 bias-down target at 10:15 would have next targeted 2623.00. Probing down to 2634.00 was recovered in time to avoid renewing the signal, but it was still a bias-down environment. Never mind that. Holding the bias timing window didn’t prevent trending down through the bias environment, a not so rare exception to the usual.

The morning’s 2626.50 low reacted up to test the open’s 2634.00 low as resistance. Consolidating through the noon hour finally broke lower to within 1 tick of 2623.00. And this afternoon’s 2625.25 bias-down signal just triggered noN-bias — the bias-down target isn’t in-play, and the bias-down signal need not define the window’s low.

RSIs aren’t oversold at the errant tick’s low, so its retest isn’t required. Extending down further will be difficult anyway during today’s lower participation and ahead of post-close AAPL earnings. That might require sponsorship and reinforcements, whereas bouncing this afternoon only requires that sellers step back.

Focus on Iran pushes price down… to support?

The catalyst for this morning’s drop was notice of a press conference that would be viewed as anti-Iran deal. And anything anti-Iran deal is viewed as a reason to sell.

Despite holding tests of room for noise up to 2681.00, the open’s consolidation above 2677.00 had created a position of strength.Not that it could prevent reacting down, but reacting down would likely recover. Reacting down to 2672.00 did recover back into the range above 2677.00, retracing it by 38.2% — not 61.8% — and triggering no-bias instead of bias-up.

The noon hour’s entry attacked the 2662.25 no-bias objective. The noon hour probed it to within 1 point of the afternoon’s 2653.25 bias-down target. That’s a lot of selling pressure.

Like this morning’s bias-up signal, this afternoon’s 2661.50 bias-down signal test invoked the grace period. Unlike this morning, the grace period is still testing the signal to trigger noN-bias. It’s possible the timing window was impacted by Netanyahu’s actual press conference. Having fulfilled the bias-down target to within 1 point, rallying would be credible — especially with the press conference now having ended.

Already 2664.50 is being tested. All of this morning’s drop can be recovered for being a reaction to non-market news. But now having tried to recover, triggering another sell signal after already reacting down from 2681.00 could launch the next downleg.