40 Bar Cycle Chart - S&P 500 SPY SPX ES1! - Updated 121722

17 thg 12, 2022

This last week, markets initially rallied on the release of the "cooler" than expected November CPI (Consumer Price Index) — only to be smacked back to reality on the comments via Federal Reserve Chairman J. Powell during the December Interest Rate Decision (FOMC) meeting this last Wednesday as "higher for longer" is the communicated pathway forward for the FED and financial markets.

Whether this is all talk to put some intentional downward pressure on markets, as financial conditions have eased as of late — or this is the actual pathway forward and the bond markets are mis-pricing the projected Terminal FFR (Fed Funds Rate, now >5% into 23'), some indicators such as our (40-Bar Cycle Chart) 📉 are highlighting what is likely another leg down in financial assets as QT ramps up and higher interest rates take their toll on real economic activity. Keep in mind that behind the scenes, the FED in coordination with the U.S. Treasury are working their magic 🧙🏼‍♂️🔮 in terms of FED Net Liquidity to keep things "(dis)orderly".

Here is the updated 40-Bar Cycle Chart for SPY ES1! SPX, which seems to be sitting on some major support. Given the structure of the markets after losing the $390 SPY / $3,900 ES1! SPX, along with J. Powell and other FED speaker comments post-FOMC on Friday, is the hopes for a year-end 🎅 🎄 rally wishful thinking?

SPY Daily Chart Template

tradingview.com/chart/5jxKmPKL/

Which camp are you in on the short-term (end of year into Q1/23') direction of markets?

• Camp A: We are likely we headed for new lows in Q1/23 (Fluctuating Inflation + Persistent Price/Wage Pressures + Hawkish FED).
  
  *Camp B: We are likely to break the downtrend into the start of Q1/23' (Peak Inflation + Deflationary Forces + Dovish FED).

Let me know your prediction in the comments below! 👇🏼