Mid-day Update

Probing fresh session high, but not high enough.

Reacting up this morning from 2419.25 had potential to 2428.00 simply as a corrective bounce. It was met up to 2429.50 before the bias environment began ending. Fluctuation around it resolved up as the noon hour was ending.

Now this afternoon’s 2430.50 bias-up signal is being tested. Testing it at 1:20 invoked the grace period. Holding it at 1:30 triggered late no-bias. If probed, 2430.50 should define the window’s upper-end. Probing above it would be no-bias trending that is doomed to failure. Back under 2428.00 would start to signal momentum reversing down already.

FOMC Minutes scheduled for release at 2:00 ET are a likely catalyst either to accelerate the recovery to become a rally, or to trigger a probe of some sort under this morning’s low. No resolution is required, but delaying a rally could very quickly devolve into a new downleg to fresh lows.

Illiquidity isn’t helping matters.

Three dips this morning each stopped at 2418.50. Then each bounced to test or attack 2423.00. Third time was a charm, bouncing up to 2424.25. Its reaction down recovered to a slightly  higher high.

Unsurprisingly for a pre-holiday session, there has been no trending and swings have been shallow. A bigger bounce remains possible before resolving down, and there’s no requirement to resolve down today.

But a bigger bounce would likely hold 2427.75 or else run up to 2432.25. Meanwhile, to remains vulnerable to resolving down, anyway.

Getting that capitulative feeling.

2431.50 did not define this morning’s low. It defined the opening hour’s low. that was after having extended yesterday’s rally overnight up to 2445.00 (ineffectual optimism). But it 2431.50 soon gave way to retest yesterday’s 2413.50 pre-open low. Attacking it to within 1 tick held through the noon hour (ineffectual optimism). The noon hour’s exit was already resolving down, and it extended to 2402.25 (pessimism).

Yesterday’s pre-open litany of all recent instances of ineffectual optimism didn’t prevent the big intraday rally. But it seems to have undermined the rally from extending. And encouraged it back down.

The 2409.75 bias-down target was overlapped at 1:20. It immediately extended down anyway, to 2402.25. And then it immediately recovered. That feels a lot like capitulation. And if the decline has run out of sellers, then a recovery won’t be far behind.

But we don’t know that the decline is done. Back under 2403.00 would target fresh lows at 2399.00 and 2393.00. If the capitulation holds, or holds a retest, then the market would likely bounce into and out of the weekend.

Trending higher through every timing window, so far.

Yesterday afternoon’s 2431.50 bias environment high had printed early in its window, before plunging 11 points. the window ended by bouncing up to 2427.50. We discussed during yesterday’s Market Wrap that gapping up and/or through 2427.50 would have to be respected. But an actual “session-long rally” setup would require gapping up through 2431.50.

None of which has prevented extending higher relentlessly today since isolating the probe under yesterday’s lows to the overnight. Every timing window has probed the prior window. This morning’s renewed bias-up target was fulfilled, and now this afternoon has triggered late bias-up.

If this were a session-long rally, then only one timing window would not print a higher high. Typically, that’s the noon hour, but not today. The afternoon bias environment was just entered, and avoiding a fresh high would enable the final hour to extend to new highs. But there is immediate vulnerability to reversing down the moment after printing a new during this afternoon’s bias environment.

Prior lows melt away.

So long as this morning’s bounce didn’t exit the bias environment above its 2441.00 bias-up signal, it would be only a temporary delay. And its 2426.00 bias-down target would be “unfinished business below.” The 2433.00 bias-down signal had triggered, and it wasn’t invalidated.

I don’t know what catalyst accounts for there still being any semblance of support at 2430.50, after having chipped away thoroughly at it last week. Regardless, the template indicated that returning to it would break sharply through it. That didn’t happen at the open, but it has happened this afternoon.

Testing fresh lows at the afternoon’s 1:20 bias timing window soon collapsed to 2421.00. Oversold RSIs at the low require at least its retest after bouncing. Which its reaction is now doing, back up to attack 2426.00.

A recovery today is unlikely under any circumstances, although it seems this afternoon’s drop is a reaction to headlines about delaying the Senate healthcare plan procedural vote. Not bottoming on the low’s retest would next be attracted down to 2415.50 and lower, potentially to 2399.00.