Fed Raises Rates: My Worst-Case Scenario for the Market

AI-generated source summary

The analysis focuses on the S&P 500 ETF (SPY) within the context of a long-term bullish cycle. Despite the overall bullish trend, the shorter-term structure indicates a bearish market phase, characterized by lower highs and lower lows. Key overhead resistance is identified between $773 and $776, falling within the short-term institutional sell zone. If SPY fails to establish a new all-time high above $750 next month, it could redistribute lower towards $750, potentially filling the volume profile gap. A move back toward $750 would be viewed as a normal pullback. The broader expectation remains for the market to push toward new all-time highs within the next 90 days, with a potential attempt at $800 by year-end. The primary concern is not if the market will reach new highs, but how long it will take. The analysis notes that while the market is in a long-term bullish cycle, the daily chart exhibits bearish characteristics, with a recent sell-off to $703.59. The worst-case scenario for the S&P 500 is a break below $730, potentially leading to a 10% correction or a bear market sell-off to $690. However, the overarching long-term bullish structure, with the multi-year BX trend indicator in green, suggests that a significant pullback to the institutional buy zone between $690 and $670 would be a strong support level for a continuation of the long-term bull market. The analysis remains aligned with the anticipation of a bullish move.

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