Morning Update (Early): Thought Experiment for Fed Day

Let's do this early? Huh? I'll be able to sleep in tomorrow morning...yeah!!!!!!!!!

First, Let’s revisit some things for new readers of my work.

On occasion I will make a detailed, but educated, guess on the direction of the markets strictly based off the charts. Typically, these would be done on days of perceived high volatility due to some news or event that is occurring. These so called “thought experiments”, were originally posted to try to make the case that news or events do not move markets, they are mere catalysts to substantiate an already existing outcome contained in chart analysis. I started doing these because as I posted and shared my analysis I would typically be inundated with comments or direct messages asking how would the Fed, the release of CPI, GDP, etc. affect my current analysis.

I simply got tired of saying, “It Doesn’t”.

So in an attempt to communicate to my followers that I wasn’t just being arrogant in the protection of my analysis, I attempted to game the price action prior to the big event in what I termed a “Thought Experiment”. Today’s “TE” would be my sixth post front running big news with my thoughts on the ensuing price action.

I think my followers would agree with me when I say I think I have proven my original point by now.

Nonetheless, I have been asked to do another so here it is. Now I will tell you what most already know. This pattern off the October lows of 3502 and the subsequent December 22nd low of 3788 has frustrated me. My problem with the October low is the manner in which we bottomed. I cannot make out a clear 5 waves down into 3502 on the smaller timeframes. Some practitioners of Elliott Wave don’t mind looking past such issues. To me, these little clues should tell us something about the pattern we’re embarking on. Since the October low we have risen but in a very overlapping manner. I could say the same for the rise off the December 22nd low. I have been calling for a larger b-wave rally into the 4300-4500 area of the SPX futures but this pattern has not been clear to me that is ready to do that. I admit that. Our larger a-wave took 10 months to complete. We're going to head up and complete our larger b-wave in 3 months? Maybe...but I just have a hard time buying into that.

So in a position where I am unclear about the overall pattern I have to go with what I think makes an already unclear pattern, clear. I could be totally wrong...but WTF.

Here’s my Thought Experiment for Fed Day:

1. I believe we open up down tomorrow morning in the cash market.
2. we spend the vast majority of the day moving flat to up but nothing impulsive. (Range prior to fed announcement 4050 low end to We close the gap from the open)
3. Upon the fed announcement we spike up into the area of 4140 to 4154 conclude our ED pattern.
4. Post 2:30 Powell conference call...we begin to decline impulsively.

Sidebar: If this does happen this would mark the second time we have come into this area and been rejected. I think if this does come into play it really sets us up for the red count. This becomes a reversion to mean trade in my opinion. Traders overshoot and undershoot all the time. They tend to live on the margins of extreme. Personally I hope we just decline to 3700's and be done with this so we can spend the vast majority of 2023 grinding higher. But the ED count is intact and I have to go with that pattern as of the writing of my morning update.

Now I will conclude with THIS IS A GUESS AND I WOULDN'T TRADE THIS. I have to admit...these "TE"'s are exhausting because I have to spend a considerable amount of time looking at multiple charts (SPX, ES) on multiple timeframes....so even if this plays out perfectly....it doesn't mean I'm genius by any stretch of the imagination.

Let's see how things shape up tomorrow and where we are in the aftermath of tomorrow . I think the clues will be invaluable. But I have to say #sub3788hurryupalready

Best to all,

Chris
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