Let's revisit the S&P chart from the past Weekend Update as it is messaging caution and opportunity following Jerome Powell's press conference, occurring as this goes to post today. Following a knee jerk reaction into the close, the real fallout, bullish or bearish, will likely be market action Thursday and into Friday. My purpose today is to make a plan for new weekly highs, or new weekly lows, whichever course manifests in the hours ahead. SPY This is the most followed trading index and offers a pure stock market directional bet, either way. Pre-FOMC volatility, it is hanging around weekly high range @ 561-566. A failure to exceed that level would be bearish, i.e., anything less than new weekly highs is a warning that 10%+ downside is possible and quickly so. Note GOOGL today, -10.9% from high to low in first two hours of trading: GOOGL Daily SPY 120 Minute This is a "channel within a channel breakdown" pattern, providing an early warning of where the dominant trend is headed. The EW and Fibonacci levels give an indication of a significant potential reward attached to one more downside break. That doesn't guarantee such a break, but it does provide ample incentive to trade in that direction and to do so aggressively. The internal channel has already been breached, putting us on high alert as one one breakdown would be all the confirmation needed to enter a fresh position in Jun puts. With the Chairman if the Fed speaking today, the market has all the excuse it needs to put on a show, one way, or the other. Jun SPY Puts Trade Management If Wave II SPY channel is broken, below about 550, enter highlighted position in Jun puts and hold with a 50% hard stop. Once put is up 50%, move stop to break-even. We will be looking for 3X to 5X minimum, 10X on a mini-crash. Once option is up 100%, make stop a dynamic 50% trailing stop, i.e., current return drops to 50% of Best Return. Alternate Jun Stock Index Puts IWM TQQQ (Leveraged ETF)
