Vicious Traps

Walking in anything but a Winter Wonderland, this market is a minefield of nasty traps. Before the FOMC today, we noted with Members that the consensus view seemed to be that the post-Fed reaction was likely to be bullish. After all, how could Fed Chair Powell actually defy the market's weakness (not to mention crude oil's) in recent weeks? As a result, I sold the few longs I had on leading up to the FOMC. 

But consistent with how devious and even nefarious the market can be at times, especially a downtrending market, we have a ferocious downside reversal on our hands now, with the final thirty minutes here serving as a test to see whether bulls can now avoid a crash, of sorts, into the bell, as many a trader seem to be caught out of position. 

One aspect about this downside reversal that has my eye, again, is how subdued the VIX still seems to be. The VIX ETFs, VXX UVXY, for example, are barely higher, despite the Dow off by 400 and swinging more than 700 points lower from session highs. Perhaps the event risk of the FOMC was already priced in. But I still would think fear would be up-ticking into such a demoralizing tape for longs. 

Thus, the long volatility trade is still on my mind, especially since the VIX has not hit 30 yet during this correction despite a vast array of damage to leaders and laggards alike. 

For now, rather than placing too many bets as offsetting hedges across the roulette wheel, which inevitably result in most activity than accomplishment, I am sitting in full cash looking for special situations to trade into the bell.