FOMC Tomorrow. Expect Big Volatility In SPX, But What Way? Jan 31st Plan
The past week of trading has been fairly straight forward in ES and what I call “technical analysis 101”. We broke out on January 19th of a massive, month long and head and shoulders pattern at 4830 and since then - as I’ve tweeted daily - its been 130 points of “buy every dip” rally. Trading does not need to be more complex. While most are getting distracted by an endless barrage of noise (macro, news, opinions, endless correlations), the timeless chart patterns tell us where we should be looking, and who is in control (bulls or bears).
As readers know, I got long Sunday evening 4907 for the latest leg of this rally. I wrote on Friday: “My general lean is always to defer to the trend until I have evidence otherwise. This means as long as we hold that 4905, 4897 support zone Monday, we can base under 4925 then push to 4942+” and yesterday we held that 4905ish support, broke out that 4925 ceiling after testing in 12 times, and started a massive leg up to 4942+, and longs paid nicely. Today, we spent it consolidating and resetting. I wrote yesterday: “If we base all night below 4954 and above 4942, it may represent an add inside a bull flag tomorrow morning” and we spent nearly all day ping ponging between 4954 and 4942, with multiple bounces off 4942, flagging out.
Tomorrow, is FOMC day and these are the most volatile, technically significant days of the year. Last FOMC in December started this latest rally leg, spiking 70 points within an hour. Can bulls keep this run going? In today’s newsletter I’ll talk this, I’ll then do a deep dive into the setup that got me long for yesterdays 45+ point rally. I’ll then discuss the plan for tomorrow and my approach to trading FOMC days.