Look For A Lower Low

Despite the spike following the FOMC comment, SPY is still in a downtrend. Yesterday was just the first pullback before the next drop. I expect to see SPY at 106.01 in the next day or so. If SPY backtests trendline A that would be the best place to go short.

SPY will gap down and open ~108.7. Due to the volatility there is a good chance that SPY climbs back to 109.2 to fill the gap, but I wouldn't count on it. I would give an equal opportunity to SPY simply tanking from the opening, that's why I decided to sell a deep in the money call 106/107 call spread yesterday to capitalize on the drop if I am unable to manage a good short entry.

Finally, look for a lower low. The moment SPY breaks yesterday's low of 108.48 it will confirm that SPY is headed to 106.01 to fill the gap. If SPY does not break yesterday's low of 108.48 then SPY is headed back up.