My gut feeling tells me the most likely strong rally may be come with a "Sell the rumor buy the news" moment. That's Wed when the Fed announces its next rate hike. People are extremely nervous at the moment heading into this meeting but as soon as it is done, maybe we will see a huge relief rally as long as there is no further surprise. I doubt we will see more surprises at the moment.
This was what I wrote at the end of Apr prior to the May Fed meeting. If you still remember we indeed saw a furious rally following Fed's announcement, a kind of wonder rally.
It seems we may very well be repeating the drama again this week. While there is 100% certainty that the Fed will raise at least 50 base points on Wed, the market seems to have priced in a 75 base points increase, given the surprisingly strong CPI reported last Friday. I'm not sure how much of a worse surprise Powell will give to the market during this speech that can trigger another waterfall crash. Personally I'd bet for a "less bad" surprise, e.g. we indeed only see a 50 points increase as it was previously alluded to. After all, each rate hike is a huge blow to the US government due to its unbearable debt burden. On the TA side, virtually all the indicators have reached to their extremity, with which a violent snap back rally can happen at any moment!
For me and my DW Family, I'm betting on the upside for the moment. Of course I could be wrong. As such we are only taking a 1:4 risk ratio to bet on this, i.e. if we take a $100 worth trade, we look for a potential $400 return.
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