The FED likely to fail in constructing a soft landing

S&P 500 E-mini Futures (ES1!) bouncing off the 0.5 Fibonacci retracement level prompted us to introduce an aggressive trade setup yesterday, with a short entry below this level and tight stop-loss above it. After that, we wished to see a surge in VIX, which subsequently materialized, and VIX skyrocketed more than 17% within two hours or so. Today, to further bolster a bearish case, we would like to see SPX fall below its 20-day SMA and no significant slump in VIX. In addition to that, we want MACD, Stochastic, and RSI to continue reversing to the downside on the daily chart. Considering that the Chinese stock market sold off overnight (with data showing a slump of 6.2% YoY in exports and exports for September 2023), we think this is a likely scenario. A global slowdown is becoming increasingly apparent, and still, many people are discounting the real possibilities of a credit event and recession. However, we stick to our original thesis that we have been warning about for months now: that the FED will fail to construct a soft landing (and that the past year of upside movement was merely a bear market rally).

Illustration 1.01

Illustration 1.01 shows the aggressive setup we introduced yesterday.

Technical analysis gauge
Daily time frame = Neutral
Weekly time frame = Slightly bearish
*The gauge does not necessarily indicate where the market will head. Instead, it reflects the constellation of RSI, MACD, Stochastic, DM+-, ADX, and moving averages.

Please feel free to express your ideas and thoughts in the comment section.

DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.

노트

VIX is up nearly 20% today.