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Something unusual is setting up in the market right now, and the timing is almost too perfect to ignore.
The market’s negative tone has persisted for months. Now we’re approaching the Federal Open Market Committee meeting with two distinct scenarios in play.
If we rally into the FOMC meeting, which lasts Tuesday and Wednesday, it could create the perfect storm for a significant drop. If we flush before the meeting, however, we’ll probably rally coming out of it. That may sound cynical, but it’s how these events often work when traders are leaning too heavily in one direction.
The Technical Level That Changes Everything
I’ve been studying the decline from the August high to the recent low. The 61.8% Fibonacci retracement — one of my most closely watched reversal levels — lands almost exactly where the FOMC meeting enters the picture.
If the market rallies into that level, it could provide the sinking point for the next leg down. That initial drop would likely carry us toward the Market Roadmap line, followed by a modest bounce and potentially a final flush.
The timing is even more important because several catalysts are converging. We’re approaching the FOMC decision, an unusually large options expiration, a seasonal inflection point and the end of the quarter. Algorithmic trading could amplify the resulting move because computerized systems react rapidly to price, volatility and liquidity signals rather than waiting with reserves on the sidelines.
Oil adds another risk. A path toward $150 oil remains possible, and a surge of that magnitude would hurt consumers, increase inflation pressure and complicate the central bank’s choices. That could turn an already fragile technical setup into a broader macroeconomic problem.
Preparing for Volatility, Not Predicting It
This is why I’ve positioned in the VIX through October. The idea is to commit a relatively small amount of capital to a defined-risk volatility position. If volatility spikes and those contracts go in-the-money (ITM), the potential payoff can be substantial.
If the move never arrives, the amount at risk is limited.
That doesn’t mean blindly betting on a collapse. Markets rarely move in a straight line, and sometimes a position goes against you. I’ve had to work underwater positions before by adjusting exposure as conditions change rather than clinging to the original thesis.
The key is identifying which scenario develops. A rally into the FOMC meeting and the 61.8% retracement level would strengthen the bearish setup. A flush beforehand could instead create fuel for a rebound.
This has been sloppy, sideways action, but that is exactly what makes the convergence so compelling. With central bank policy, options positioning, seasonality, oil and algorithms all in play, the next move could be fast and significant.
It pays to prepare for both outcomes before the market makes its choice.
Jeffry Turnmire
Jeffry Turnmire Trading
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I’m just a regular dude in Knoxville, Tennessee: a husband, father, civil engineer, urban farmer, maker and trader.
I’ve been at this trading thing with real money for 20-plus years, and started paper trading over 35 years ago. I have a knack for making some epic predictions that just may very well come true. Why share them? Because I like helping other people — it’s the Eagle Scout in me.
*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
P.S. My No. 1 Day Trade for September Has Gone 11 Straight Months — 207 trades — Without a Loss
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