Mid-day Update

Busted bullish setups haven’t defaulted to bearish.

Price action in between Fed Chair Powell’s congressional testimonies continues to be choppily range bound. That range is repeatedly testing support below, so there’s no assurance of the range persisting.

The open’s Isolation setup barely triggered by maintaining the open above yesterday’s low, despite immediately retracing down through 9:45. Ultimately, the morning probed 6 points under yesterday’s low down to 2737.50, which isn’t optimal. And it doesn’t get a benefit of the doubt.

The morning’s 2754.75 bias-up signal triggered cleanly at 10:15 but it was never more productive than the 2762.00 test before then. So, exiting the bias environment under its 2744.50 bias-down signal was eligible to invalidate the bias-up, so its 2764.00 target doesn’t become “unfinished business above.”

Sellers tried to exploit the rejections, and the noon hour dipped to 2741.75. But rallying into the noon hour’s exit up to 2754.00 has triggered a late bias-up above 2750.50. Exiting the bias environment under 2741.00 would invalidate it — for a third window in two consecutive days. Back under 2744.50-2746.00 would start to make that likelier.

Is the market hovering into Thursday morning?

The reaction down from attacking 2790.00 had first fallen to 2766.00. Its reaction failed, and fresh lows tested 2757.00. That’s not an arbitrary low. Recall that rallying into the two-week old high had targeted 2753.25 and 2757.00. Only the former was tested up to 2755.00. Now that area is support.

Its reaction up to 2773.00 suggests the market recognizes this support. The reaction’s peak under this afternoon’s 2775.25 bias-up signal suggests the market isn’t yet comfortable with this support.

2757.00 can be tested down to 2753.25 without even suggesting a more substantial downleg is underway. Ranging through today and tomorrow wouldn’t be surprising, in between Fed chair Powell’s House and Senate testimonies. Meanwhile, the range’s upper-end could test 2791.00.

Breaking under 2753.25 through a relevant timing window would instead suggest the 1987-style crash template is developing. Its greatest window of vulnerability is today and tomorrow. Its potential downside could be avoided, or replaced by a surge of equal proportion, if left to develop organically. But the current pattern is fragile enough — extended and holding resistance with no further upside requirement — not to tolerate a very negative headline.

Morning bias rejection gets swallowed whole.

The opening surge’s test of this morning’s 2766.50 bias-up target had reversed back down to and through its 2757.00 bias-up signal. Rejecting tests of both bias-up parameters had put into play offsetting tests of both bias-down parameters.

Except… the rejection came late, requiring the grace period, which undermines the rejection’s reliability. And exiting the bias environment back above its bias-up signal helped to reject the rejection.

Also, the opportunity to resume the decline barely overlapped its 2755.00 signal before reversing up sharply through its 2759.00 buy signal. The latter has extended to fresh highs at 2773.00.

Now this afternoon’s 2766.00 bias-up signal has triggered. Its 2774.00 bias-up target has been met to within 4 ticks. That’s close enough for the target not to become “unfinished business above” if left outstanding. But unless the upside momentum is rejected, it’s still targeting 2813.00 and 2825.25-2827.75.

Probing above resistance.

Isolation recovery vs. Rally rejection.

Trending up through the open above yesterday’s lows had isolated the probe under yesterday’s lows. This completed the Isolation setup, next likely to rally through the afternoon, probably into the weekend, and possibly out of it.

Meanwhile, the three-day old pattern of rejecting early rallies has resurfaced. This morning’s rally extended nearly 21 points from its open up to 2731.00, 49 points above last night’s low. The three prior sessions reversed their rallies to close back in negative territory. Today’s session has trended down since noon, probing under the 2710.25 opening low and 1 point under its 2707.75 post-open low.

That’s still 10 points into positive territory. But this afternoon’s bias-down environment hasn’t yet stopped trying to extend lower. Isolation can probe under the open, but not negative territory, which is the rejection pattern’s goal.

Back above 2718.75 would start to signal the afternoon pullback had ended. The Isolation setup should then crush the early strength rejection pattern, extending to fresh session highs. Otherwise, not fulfilling the completed Isolation pattern would be bearish, albeit less bearish than rejecting it back into negative territory, which would suggest the reversal from last week’s highs has resumed.