Of Mice and Men

Wow, the best laid plans... didn't quite go as planned.  We got the short term capitulation that I thought would wait till January, and the pressure from funds liquidating stocks was too much to overcome the seasonal tailwinds with the Fed meeting this Wednesday and opex Friday, with Christmas next week.  Getting down 70 SPX points, less than one trading day after entering is just horrible timing.  But at least we got the panic and cleared out a lot of weak hands.  I wasn't thinking about holding past Wednesday, but with the beating this market has taken, holding for a year end rally from here is getting to be a high probability scenario. 

The volume was heavy yesterday and the put activity was rocking, so there was definitely some panic out there.  That last drop towards SPX 2530 was scary, and I don't think I'm the only one who felt that way. 

The long that I am currently holding is just a trade, I am definitely hesistant to hold it past the end of next week.  If somehow there is a move towards 2620-2630 before the FOMC meeting, I will trim there, and look to buy back after the FOMC announcement, to hold for a few days into the Christmas week slowdown, which should be beneficial for the bulls. 

The expectations for Powell to rescue this market is still there, so if we rally into the announcement, I see room for a selloff right afterwards, but it should be brief, because of yesterday's capitulation clearing out a lot of the forced sellers. 

Being even one day early catching falling knives in this sick market can't get your hand shredded.  With the European close behind us, most of the pre-FOMC meeting sellers should be finished.  Still feel nervous holding an SPX long under the current environment, but it is the high probability play.  I am not expecting a big rally into year end, perhaps a move to SPX 2670-2690.  A lot of resistance at that level, so I would look to short there for a move lower in January.