Oh brother oh brother oh brother. we need to talk about the market if you haven't been paying attention to it, probably for the better because things have not been so Bueno the market, especially the equities Market has been selling off and off and off. and I want to share my opinion of why I think it's actually going to get a bit worse now obviously I'm not Clair and Voyne I'm not a financial advisor so I might be wrong. but I'm gonna present all of my evidence to you in this video of why I Think things are going to get a little bit more painful before they get better.

This is not one of those doomsday videos because I am a strong believer that if you know the direction of the market, you can make a lot of money. so I'm not saying uh oh like you're about to lose all your money I just want to share my thoughts and opinions and the data set that I'm using of why I think the market is going to be continuing downward before it actually pops back up. So with all that being said, if you enjoy this type of content, don't forget to hit the like button. join up with the moon gang by hitting button and now let's rock for posterity's sake.

I'm filming this in the overall Market commonly tracked by the S P 500 500 of the biggest companies that are thought to represent our economy pretty fairly is tracked by the ETF Spy also known as the Spy. It is currently trading at 397 and as you could tell over the past three days it's been red and red and red. And really, we've been on this downtrend now just from a point of technical analysis. We've been following this trend line down and down and down and down for all of 2022.

and then as we were kicking off the first month of trading in 2023, we did break through. That's awesome. It's a nice breakout. We came back, we retested, we recently bounced off of that and I Don't know how this is gonna go because no one can guarantee it, but I'm betting my own personal money that we are continuing downward.

I Don't believe that this overall breakout is going to hold. Now to answer your question, why have we been selling off recently? What is going on? The answer is the Fed and kind of inflation, but particularly the Fed and more specifically, the Chairman of the FED Jerome Powell So Jerome Powell Over the past two days has been speaking with Congress He had one day of testimony with the Senate and another day of testimony with the house that actually just wrapped up now that I'm filming this video. I Listened to all of it and it all boils down to the fact that the Chairman of the FED daddy Powell at the guy who at one point was money printer goes Burr Well, he's now actually the opposite and saying wow, our inflation is way too high and we need to fight him. To be fair, Inflation has been coming down in June of 2022.

the CPI the Consumer Price Index which is one popular measure of inflation. The other one is the Pce. If you trust the FED, they actually use that one more. But for whatever reason, the media likes to talk about the CPI.

but I don't want to go off on too much of a tangent. In June of 2022, we peaked out at 9.1 The most recent recent reading came in at 6.4 So obviously we're trending down, but we're not where we should be. We should be at two percent. That's our Target rate.

Obviously, we're 3x where we need to be. Now this is where things get a little bit complicated to fight inflation. There's a couple tools that the FED has at its disposal. One of those involves lessening Demand by jacking up the FED fun rape.

You might have heard the Fan Fund right. You might not have heard of the FED fund, right? But what you need to know is that this sets the President for many different things in our life. The main thing is in the world of real estate and it's going to impact your mortgage rate. But think about the world of loans.

It's going to have an impact on your personal loans, on your auto loans, on your student loans. Think about your credit card payments. That's just to name a few. This is all kind of established by the FED fund rate.

Not too long ago, it was at zero percent. They set it at zero percent when we were in The Rona period. the economy wasn't so strong. they were trying to stimulate the issue is things got a little too hot.

the kitchen was getting a little spicy in there, and now they're trying to do the opposite because we don't want to get into a situation of inflation hyperinflation. We definitely don't want stag deflation, so they're trying to reel it back in. and they can do that by lessening demand. They lessen Demand by increasing the FED fund rate because it ends up increasing all these other interest payment type related things.

And that lessens them in because as things get more expensive, you can have less people spending that type of money. The issue is is, if you overdo it, you can actually get into a recession. So we're in this situation now where our inflation time 6.4 percent it should be at three percent. But now we're getting still strong economic reports.

We're hearing really good numbers of job openings. We're hearing strong numbers of retail sales. We know that the economy is still expanding, the economy is still hot. So now the Fed's in this awkward situation where they have no reason to not fight inflation more aggressively.

That's referred to as hawkish. And in this situation when they're hawkish, that is bad for the market. For those of you who don't know when the FED is fighting inflation and they're not really stimulating the economy, That's hawkish. The opposite side of that is referred to as being dovish.

The economies really really hot. as in, inflation's too high. It's their job to bring inflation down. They do that by lessening demand.

You lessen Demand by jacking up the FED fund rate that has the trickle-down effect. And now we're getting confirmation that the market was a little ahead of itself. The market, as I showed, you started to bounce a bit because people are starting to say, well, maybe the Fed's done with their fight because sometimes their decisions take a while to impact the market like it takes multiple fiscal quarters for this to all play out. And the market.

the big money people were starting to think, well, maybe the fight's all in 2022. Then the FED will pause. They'll kind of just sit around and wait to see how this all plays out. and we might be able to really Coast into 2020 23 And this is the important distinction between the economy and the stock market.

So the stock market was thinking, okay, they're done doing what they need to with the economy. We're good. Like back to rippity, skippity doo dah, back to getting into our rocket ship so we could just go to the High Heavens This happened a couple times in 2022. If you look at Mid July to mid-august the mid-october to the start of December Those were periods where the market got this idea that the Fed was going to stop.

They're like nope. Okay, they're done being hawkish and the market ripped. Go look at a chart. Right now, those are periods where the market went rippity, skippity doo-dah And those periods ended when the FED in one way or another reminded the world that they are, in fact hawkish.

They are in fact a fighting inflation and they are in fact, very, very serious about it. And that's what's going on right now. Jerome Pal was just speaking with Congress the Chairman of the Fed and he once again reminded the world that the economy is still running way too hot and it is their job to fight inflation. And that's exactly what they're going to do.

And this all has a side effect of putting downward pressure on the equities. Market stocks plunge as Feds hawkish tone jolts markets. And if you want to know more specifically of the verbiage they use Edge Chair Palaces interest rates are likely to be higher than previously anticipated, so the peak of where this Fed fund rate higher, they're going to be more aggressive, bigger, faster, stronger however you want to refer to it. But yes, the FED is going to be hawkish.

I Don't understand why the market is always putting the cart in front of the horse thinking that they're done. I Actually find it absolutely ridiculous because this isn't really an organization that Bluffs that's not what they do they seem to actually be very forthcoming with. Nope. we're finding it.

We're fighting it. We're fighting it. The last time they were really weird about it was when they called inflation transitory and that was ridiculous because if you've looked around at all, we're still dealing with inflation. With all that being said, what's going to be happening in the short term and what's going to be happening a little bit longer out than that? Well, in the short term, we get the next decision from the FED on Wednesday March 22nd.

This is the conclusion of the Fomc meeting. the Federal Open Market Committee meeting. That's where they decide what they want to do with the FED fund, right? Are they going up? Are they going down? Are they going to keep it sideways? As of now, there is a 78 chance that they're going to do a 50 bips rate hike and there's also a 22 chance that they're going to do a 25 bips right hike. Obviously, the higher the odds for the higher the rate hike, that's going to be more hawkish.

Before Powell spoke with Congress, there's actually a greater chance of a 25 bips right hike. and that's another example of the market thinking that the FED is going to be a little bit more dovish when they're not I feel like the fed's probably ripping out their hair and they're like, why does the market keep doing this when we're being extremely clear about our plans So as of now, there is a 78 chance that's a 50 Bips rate hike. Last rate hike for any those of you who are curious was 25 Bips, but right now the markets are, they seem like to be pretty serious. Eventually, they will stop doing this.

Eventually they're going to Stamp Out demand enough that inflation will come down, but that doesn't seem to be in the short term now. I Just want to throw out a couple things. There are other pieces of data that will be coming out between the time that I'm filming this video and their decision on March 22nd that will have a massive impact on their decision and thus a massive change or influence on the odds of what the rate hike will or won't be. For example, we're getting the unemployment report on Friday of this week.

We're going to get the next CPI report on Tuesday of next week. I Believe there's even another Pce report. We have another retail sales report. There's a lot of economic reports that they're going to be considering and thus will have an impact on the likelihood of what the right hike will or won't be.

So obviously in the short term, I'm not the most bullish on this situation. In fact, my active trading account I'm positioned it bearish on the market right now because I think that's the smart money move. Once again, I might be right I might be wrong. but I think the odds are currently favoring my position.

But then that brings me to the next thing of: when will things turn? What are we looking for? The fact that the market is always seemingly pumping on this concept of pivoting the FED Doing a pivot. You know, like keeping their interest rates flat instead of continually hiking, kicking them in flat and then eventually bring them back down. I Think people are misconstruing what this will actually do I don't know what it will do, and unless you're a time traveler, you don't know what it'll do. But I just want to bring up some facts.

I Went and looked at all the times historically all the way back to the 60s that the FED had hiked up the rates and then kept them flat and then decided to cut from the actual pivot because we've been hearing that so much pivot pivot. pivot. That's going to be great. As soon as we pivot, everything's gonna rip.

We should. YOLO We should buy the data. Doesn't suggest that from the moment of the pivot, these are the percentage falloffs. drawdowns until the actual bottom.

So the pivot In 1969, we fell 36, the pivot in 1973, it felt an additional 48, The pivot in 1981, we fell another 27, in 2000, we fell another 51, in 2007, we fell another 58 and in 2019. From the pivot to the drawdown, we fell another 35. Out of the last six pivots, the pivot wasn't the bottom. We had every single time double digit drops and they were almost all above 30 except for one.

Like I said. and I want to make this explicitly clear? There's no way to know how it'll play out this time. That's impossible if you knew that you would be the world's wealthiest person. But I think what we could do is obviously look at the odds, stack the deck in our favor, and make informed decisions that way now very quickly.

If you enjoy what I have to offer you I just want to let you know that I I have a free trading newsletter where I do these types of breakdowns basically I let you know what happened in the market, what to look forward to the next day. In terms of seasonality, this seasonal, bullish, bearish influences what's going on with the market, what's going on with the macroeconomic events, and I even share my new positions. My close positions and positions that I'm looking to get into, this will be pinned at the bottom of the video. but once again, it's just a free trading newsletter and I'm just trying to provide as much value as I possibly can.

I hope you enjoyed the video I hope you were able to learn something I Do appreciate your time. don't forget to like and sub if you enjoyed this type of content and I'll catch you in the next one. Have a beautiful day.