FOMC Delivers Major Volatility, But Now What? November 3rd Plan
Another FOMC day in the books and for traders trading these for the 1st time, today was a classic example of what they look like. As I described yesterday they are random, volatile, trappy and “the worst days to trade”. Despite this, they often have a general structure. I wrote yesterday: “While there are no certainties, the general pattern for FOMC days is there an initial fake/trap move right after the meeting at 2PM, which then reverses”.
This was today: The problem for bulls? The initial move was up and ES saw an initial spike reaction to 3900 resistance, which turned out to be the trap move, followed by a 125 point pure melt-down. As traders know though, FOMC volatility doesn’t end on the day of, and typically the next day is just as extreme, often reversing the FOMC day move as was the case on the May and June FOMCs.
Tomorrow will be decisive. In today’s newsletter, I’ll be talking how todays action fits into the broader pattern, whether the rally leg is done, an important signal forming in the RSI, and the plan/targets tomorrow.