FOMC Tomorrow; Expect Volatility in SPX. But What Way? February 1st Plan

As mentioned yesterday, buy the dip has been the theme in ES for the entirety of January, and it was no different today. This was the expectation in yesterdays newsletter, where I wrote: “My general lean is unchanged - as long as 4020-15 holds (3995-4k on any quick failures) I think we can return to 4050, 4075-80 as per green arrow below”. This played out perfectly today; we saw a quick overnight spike down to 4007, reclaimed to 4020 by morning triggering longs, then saw a rally to 4050 then 4075 targets.

The fact today’s dip bounce was bought was no coincidence. 4015-20 back-tested the core downtrend line from January 2022 which broke out last week, then defended today. This textbook back-test and rally obviously favors bulls, but there is one issue in that FOMC is tomorrow. FOMC's are notoriously the most volatile, difficult to trade, and - recently at least - bearish events for ES.

In today’s newsletter, I’ll be breaking down my approach to trading these events, discussing the last few FOMC’s, then discuss the actionable trade plan for tomorrow as well as the big picture view.