The chart shows the fed-futures data on top (inverted) and SPY on the bottom. The scale on top goes from 0 to 100 at the bottom....current future price is 99.83, 24 hours before FOMC announcement.
The issue is that the fed data is on an exponential scale (up to 100).... so a change from 40 to 70 and a change from 99.8 to 99.9 both mean "the probability has doubled".
Regardless of scale, the chart supports the following conclusion:
1) the probability of a hike to 0.5 has a LARGE effect on SPY .
The chart supports that.
2) current future price is 99.83 translates to the probability 23% (of a hike to 0.5). Thats priced in.
3) if the probability changes to 100%, (the fed hikes) and the relationship in the chart holds, SPY will IMMEDIATLY fall... "a lot".... "far"... "the red candle wont fit your laptop".
It may bounce, rebound, retrace....all that good stuff. But it will fall immediately.... independent of what happens later.
so, 23% chance of a LARGE and IMMEDIATE drop. 77% of ???, possibly a smaller but significant pop?