Will the The Fed - Federal Open Market Committee, the FOMC, raise Interest rates?

Ok, here we have it.

In 2001 we had the DOT.com crises where the SPX fell by 800 points, or 51%. The decline was steady and lasted 2 years until it started to recover.

The RSI came out from "Over Bought" territory, developed a Divergence and the MA5 confirmed with a crossing below the MA20, the blue line on the monthly charts!

Then in 2008 the Financial Crisis hit. The SPX just came back from the losses of 2001 and fell again into the abys. SPX fell by 902 points or 58%. It took the SPX 1.5 years to reach bottom.

Also here the RSI fell below the 70% Mark and the MA5 crossed below MA20. The SPX closed below MA20!!!

All your wins and savings of the past 7 years were wiped out and landed in the pocket of the smart money. Why? Because you make more money in a downfall if you know options and shorting! It took 5 years to recover here. And then one year after that oil prices collapsed.

During this time the crises developed AFTER many years of increasing interest rates. You could say even though the rise of interest rates will damper the economy I see here that increased interest rates leading the crises. 

Maybe the rise of interest rates will not hinder a crises to develop?

We see interest rates in bars and inflation in the line charts. And the green circle tell you when the crises started to hit and the SPX fell below the indicators.

The Wuhan Virus Crises came in early 2020 and the US made actually a fast recovery. Maybe it was only the mild version of the Military lab in Wuhan? This crisis was not due to economic reasons and hence the indicators were NOT triggered in the monthly charts. In the weekly, yes it did. But compared to the other crisis this Wuhan thing was mild!!

But this also means that everything that built up before and was not corrected yet needs to be corrected. The market will do it. We still have the housing bubble, again. We have inflation and we have low interest rates. RSI is in "Over Bought" territory. 

Here is the SPX over the years. We can see what makes the difference.

1. While the Dot Com Crises happened in a low inflationary environment and the decline was steady over 2 years, 51%

2. The Financial Housing Crises happened in an high inflationary environment. Normally you raise rates, then when the inflation settles you decrease the rates and when the inflation further decreases you lower rates even further. But in the Housing Crises a lowering of the Interest rates led to more lending since the rates where coming down. More low income families were tricked into mortgages, which then let to the bubble exploded and the market dropped by 58%! This event took 1.5 years to reach bottom level.

3. Now the Feds lowered the interest rate at the beginning of the China Wuhan Virus Crises, which was great to give the economy a boost in this horrible attack from China. But we also can see that we have similarities to the housing crisis. We have an inflation at 5% and lowest interest rates ever. Hence the SPX is taking off like a rocket ship and is creating a gap where it is flying way above the mean, any mean, here the MA20. The Wuhan Crisis in stock markets terms was ridicules short. 2 Months! 34% drop.

4. In my option the interest rate should have been raised when the SPX moved ABOVE 3,500 points and the inflation hit 3% because this is above the pre epidemic level. They missed the train. Or they didnt want to take it because there is another one coming, a faster one, a bigger one?

It is also noteworthy that the implementing of new regulations can choke an economy and do work against inflation well. This happened under Obama in the late 2014 until Trump came into office.

What is next?

There has to be a correction. Even it might not be a Recession or Stagflation but something has to give. the rate of increasing stock prices and so housing for other reasons, cannot go on for ever. The Prices have to meet the averages. And inflation does NOT seem to be temporary at all. Grocery prices are up and so is everything else. 

The Feds will raise interest rates in near future. The conditions now are worst then they were in 2016 when the Feds started slowly and then faster increasing the rates. They have all the reasons and more NOW than they had before INCLUDING the Financial and housing crises.

I expect a market correction of 20-25% and I base this solely on the GAP that has develop and that the prices must meet the average. How long will it take? I bet on six months fast and furious. I base this on the previous drops and the SPX can drop by 900 points to 3,500 points in six months. 

Lets watch the different indicators and the RSI in the monthly charts to see if the SPX drops below the MA20 horizon. But before you see that manifesting in in weekly charts the blood bath and massacre is already ongoing for the same time. So lets watch the leading indicators.
PMI, CPI, CSI and housing starts and authorized permits, the Bond rates!!

But this is just the opinion of a crazy talker