Mid-day Update

Post-open bounce retraced, for awhile.

Greeting the open at 2700.00 had reacted up to 2713.25 and 2718.75 targets. And higher to 2723.50, but too late for the extra effort to earn any extra reward. Too late, because the 2717.00 bias-down signal had triggered cleanly, and it wasn’t recovered in time to invalidate it.

Any doubt otherwise has been countered by dropping back to the open. Not only the open, or not really the open, but 2701.50. There’s nothing bullish about its retest. Its re-re-retest including the overnight action. Even if recovered again, the existence of these two new intraday tests can’t be undone.

So, the ongoing question is whether the eventual negative consequence can be delayed by yet another detour up. The afternoon’s 2708.00 bias-down signal was just invalidated after having triggered cleanly. There’s no requirement to retrace 2708.00 unlike this morning. But 2708.00 happens to be a calculable sell signal, and back under it would signal the drop resuming.

Meanwhile, invalidating a bias signal has no objective. The 2699.00 bias-down target could be fulfilled anyway. And there already being no bullish reason to revisit 2701.50, its break this afternoon would be likely to extend down sharply.

Sellers have difficulty hanging on.

Gapping up to 2731.50 and initially probing 1 point higher had stopped short of touching the 2734.50 overnight high. The balance of the morning trended down. The gap back to yesterday’s 2718.50-2721.25 closes was tested into the bias timing window — which held, trapping sellers.

Trapped sellers were only so many. A corrective bounce up to 2728.50 was too late to invalidate the bias-up signal, and it resolved down to 2710.25 going into noon. But the requirement for an offsetting test of this morning’s 2704.75 bias-down signal has become “unfinished business below.”

Now more trapped sellers have helped to trigger the afternoon bias-up. The second probe into negative territory wasn’t maintained coming out of the noon hour. The likely reward is a probe above the overnight high to 2736.50.

Otherwise, back under 2723.00 would start to suggest momentum reversing down anyway. Actually launching a new downleg should be very obvious at the time.

Late rally extends through the noon hour.

Potential for a Dry Cleaners morning had been narrowly avoided, but that didn’t require trending at all. Trending also wasn’t required after only attacking the 2674.00 bias-down signal before triggering no-bias. But trending developed anyway, and it extended to the 2699.00 bias-up signal.

Optimism wasn’t restrained, but it was corrected in time to avoid “no-bias trending.” Extending higher through the noon hour up to 2721.25 has triggered this afternoon’s 2715.75 bias-up signal. The afternoon’s 2726.00 bias-up target is in-play — essentially the 2725.25-2727.75 area.

During this weekend’s Saturday Review we discussed this being the target area of a possible corrective bounce. But only a corrective bounce. Closing any higher would suggest something much bigger underway. That’s still unlikely to develop from Friday’s bottom that developed so close and so near to Tue-Thu three consecutive downtrending sessions.

The bias signal has yet to be any more productive after 1:20 than before. So, it can still be invalidated by exiting the bias environment at 2:30 under its 2703.00 bias-down signal. As was the case on Friday, there is no time limit or time restraint to a break lower from probing Friday’s lows.

Disaster seemingly averted. But, what happens without a reward?

Congratulations are in order for absorbing an ugly open that could have led to an uglier morning and the ugliest of days. Expending so much selling pressure so early helped the 2652.00 bias-down target hold against the remaining sellers. That wasn’t pretty, either, but eventually the alternative to extending down was to retrace up. The bias environment peaked upon filling the gap back up to yesterday’s ~2677.00 close.

Its reaction down only attacked the 2652.00 bias-down signal. Another bounce up to the 2677.00 gaps eventually trended up into and through the noon hour to 2685.00. But no later and no higher. Reversing down under the afternoon’s 2680.25 bias-up signal avoided triggering it. Extending lower held a test of the 2666.00 bias-down signal down, required to hold during a no-bias environment.

So, is that it? Is the only reward for having absorbed the ugly open just a return to unchanged? Don’t get me wrong — we should all be thankful every day not to be thrown into the fiery pits. But being dangled just above them seems closer to punishment than salvation. Especially into the weekend, when the market collectively begins realizing that to stand still is to fall behind.

The no-bias environment is now within view of lapsing at 2:30. It won’t be too early to break back under 2666.00 and lower into the close. Neither is it too early to break back above this afternoon’s 2680.25 bias-up signal, which is being tested now. And not extending higher is to fall. (Apologies to Bucky Fuller.)

Probing the same pullback limit that had held already last week.

The pullback into last week’s lows had to hold 2701.50 through any relevant timing window to remain a pullback. Plunging into its test last Wednesday afternoon had initially extended overnight to 2682.00. Recovering the excess through Thursday’s open had formed the Isolation reversal setup.

That reversal setup was productive. Extending it probed the pullback’s origin for new recovery highs. There’s no bullish reason to revisit that upleg’s origin — i.e. 2701.50.

2701.50 was probed during the noon hour, and broken sharply exiting the noon down to 2680.25. At least 1-minute RSI is diverging positively at the low, which just reacted up to 2692.50. Exiting the bias environment back above 2701.50 would help to suggest the interim break was sponsored only by weak-handed sponsors. Otherwise, the next downleg is likely already underway.