Looking at /ES, it looks like we are trading pretty strictly within this channel currently. Tomorrow is going to be key. I think we FOMC doesn’t rug pull us, we could break this channel and possibly break above the 200 day EMA by next week.
A lot of the economic outlook is looking pretty positive outside of inflation, but the energy shock is the main driver. Consumer sentiment, ISM Manufacturing still showing growth, and people are still spending like crazy.
I think if we get 25 point base hike tomorrow, we should see a nice rally back to ~4500ish. If they do decide to do 50 basis points tomorrow, I think we drop to 3800 and that could signal the bottom. Overall, I’m pretty bullish for the next 6 months as long as the FED stays cooperative. Many people overlook the fact that banks have $1.5 trillion sitting in reverse repo which can flood the markets with liquidity even during a growing interest environment.
I would focus on playing stocks that have high cash flow until interest rates ease.