Today saw some extreme chop across the indices with buyers stepping and overpowering the bears after lunch. Tomorrow is FOMC and Powell speaks at 2:30 EST, so be prepared for some volatility. The overwhelming odds favor the Fed to keep rates the same tomorrow. Regardless of what happens, here are my thoughts. Since we've rallied over the last few day, albeit slowly, we've created some breathing room and moved up to retest breakdown levels above. I have mentioned this countless times, I know, but rallies or sell offs with a lot of retests show sustainability in direction. When we rally or sell off constantly without any reversion, it's like pushing a beachball under water and can result in a large counter-trend move. Favoring the bear side, I like seeing the upward retests to create more room for another move down. That being said, FOMC days are highly volatile and can see massive swings both directions. The way I usually play it is to position counter to the most recent pressure right before. In this case, we've been seeing buying pressure the last few trading days. If we rally tomorrow into 2pm, I'll feel more comfortable adding to my short positions. If we sell off all day and get back down to trend line support on QQQ and SPY, I'll probably take some long shares right before. It's also always a safer bet to wait for the initial move, then trade the levels.
My plan for tomorrow is as follows: 351.75ish is upper downward trend line while 348.31ish is the lower one. If we rally to the upper side, I'll add more SQQQ around there and if we sell off to the downward one, I'll add some long QQQ shares right before 2pm. If we break out past either of those levels, I may elect to not add anything, though it's possible I try and play a retracement play (retest of the breakout/down). If the decision causes a breakout over 355, my bear bias will flip again to bull (at least for the short-term). Depending on strength, that's my mental stop loss area as a breakout above might cause another leg back to the 360s. With a lot of tech teetering on the edge, it's very likely that the bleak economic outlook has finally caught up to the stock market, even if it takes some time to materialize.
A little bonus out there if you haven't been watching - Gold has been performing very well and my only regret from the last time I mentioned it was not buying more. GLD is trading above 184 again for the first time since May. If it can muster up more strength, we're extremely close to breaking to new all time highs. Gold is my only current long-term position. At the very least, it's worth checking out.