Assessing probabilities for the Stock Market

What I am watching, thinking and doing.

I was waiting for the last CPI report to make up my mind on what to expect next.

CPI came at 8.2% for the last 12 months ending in September 2022. Looking under the hood, the report was worst than expected.

Bottom line: the FED will keep its agenda of raising interest rates to slow down the economy and demand.

For how long? Nobody knows and that’s the key issue.

The longer inflation will stay high in the US, the worst for the markets.

Let’s have a look at a few data points/charts:

NASDAQ

In my last update, I mentioned how the Nasdaq was trading within a box (range) and if that level was broken then we could expect further downside.

Well, we are right below that level and a new leg down looks likely. How much? Anything from -7% to -20% from current levels.

From November 2021 when the Nasdaq peaked, we are down -36% already. If we experience a new leg down, we can get to a -40% or -50% from that peak.

I am not predicting that this is going to happen. 

From a probability point of view, it may happe…