Has Dust Settled After Fed Day? Not Just Yet

I am going to look at a few markets (ES, Gold, DXY) that have reacted significantly to the Fed's "message" yesterday afternoon. What's the message? Here's my synopsis:

After pumping $8 trillion into the economy since March 2020 to provide the necessary stimulus to emerge from the pandemic lockdown, growth is relatively strong, inflation is finally above our 2% benchmark – though probably will prove to be a transient blip, but the labor market remains well below full employment.... So we think we might need to raise the Fed funds rate a measly 25 basis points at the end of 2022, and maybe another measly 25 basis points at the beginning of 2023. In the interim, nothing really will change.

If my synopsis of what the Fed said yesterday (remember, they didn't do anything) is reasonably on point. Then, we see a host of previously one-way markets reacting to "the news" with counter-trend moves that should prove to be a healthy refresher of their still powerful dominant trends.

In overnight action, the Emini S&P 500 rolled over into a nose-dive that marginally violated yesterday's post-Fed low at 4190.25, and pressed to a new corrective low at 4183, which was the exact measured target zone (4180/85) off of the Round Top Formation that we discussed yesterday afternoon. Now that the measured move has been satisfied, we have to see if ES can sustain strength off of 4183, and carve out a rally that exhibits bullish form, which will provide us with clues that the correction is over, and a new upleg has commenced.

In that we have seasonal and presidential cycle weakness (McClellan) theoretically ended between June 17 and June 24, the window for both a significant pullback low and powerful upside reversal is upon us. We have to look out for a severe oversold condition, signs of downside exhaustion, and then a potentially violent technical upside reversal to alert us to the end of the corrective period and the resumption of the still-dominant uptrend.

At the moment, based on the set up shown on Weekly Chart of DXY . From the look of the current set up, DXY is heading still-higher, to challenge resistance at 92.40 to 93.40 prior to my expectation of a downside pivot reversal and resumption of the dominant downtrend.

From a bigger picture perspective, current strength in DXY represents an oversold bounce off of multi-year support at 88-90, within a still-dominant and powerful downtrend off of the March 2020 high at 102.00. That dominant downtrend do not exhibit completion, which if accurate, means that after this counter-trend bounce runs its course, DXY will roll over into a nosedive that break 88-89, unleashing a torrent of Dollar selling that could drive it to 82 to 80 in the weeks and months thereafter.

If such a big picture scenario unfolds, gold will enjoy powerful tailwinds from U.S. dollar weakness.