I agree with you on scenario 1. The one difference maker may be the cumulative earnings of the S&P at the end of next week. If it continues to decline optimism may start to fade. I am watching but not diving in to this scenario.

On Scenario 2 I think inflation is sideways to down. However as long as services continue to stay sticky we see the Fed increase or hold rates in '23. I am sort of past inflation, I see this as last year's story.

The story in '23 will start to switch to consumption as it is 70% of the US economy and business investments 18%. As we see these numbers decline GDP falls fast. This is why I am more interested in Retail Sales now. I think it's all about when more hard data starts to show this decline.

Without a question, unemployment is a lagging indicator. I need to study how the data is collected, when unemployment is counted, and what other sources there are to check against the department of labor.

I also believe companies have shied away from layoffs in favor of cutting Cap Ex to meet earnings estimates. In Tech most labor is Cap Ex. When non-Tech starts to cut Op Ex we will see larger waves of layoffs.

If I am right about Cap Ex being the cost savings measure for companies in this Quarter, then it may make it harder for those companies to switch on growth again.

I am not specifically playing to the Fed decision on Wednesday, I sometimes trade during the day when strong signals indicate an upward or downward movement.

I am looking at some positions against electronics and department store retailers given the large decline recent data has shown in these categories.

My strategy is focused on 6+ month option expirations that return 1-5 or 1-6 by buying out of the money spreads slightly above the bottom of the previous lows (~3660). I am about 25% in with 75% waiting to be deployed when I am more certain of momentum switching.

Bloomberg had reported ~120K big tech layoffs over 2022. Some estimates expect the economy to start losing ~240K jobs / month.

The reason I think Tech went first in layoffs is because Tech doesn't have the other Cap Ex buckets to shed first. Tech's employees (Product, Engineers, Design) are usually included in Cap Ex calculations in comparison hourly / GA workers are not. In other industry's they can cut back on new store openings, inventory purchases, etc.. Tech just doesn't have these expenses so they are left cutting employees first.

I am watching for two things:

1. Fed raises rates and Apple / Amazon report negative forward guidance, this could be 1 catalyst for a large downward move.

2. From Dec -> Jan we have seen about a 10-12% MoM raise in gasoline prices . Assuming this has a similar affect on inflation that Octobers increase had, the second scenario I am looking at is an increase in MoM CPI followed by a decrease in Retail spending for January. I think this is the more likely catalyst for breaking the upward movement.

I don't really care about individual earnings and this is not a thread about Tesla bears vs. bulls (I don't care). My argument was about the direction of the economy and not the current most pain / hopium phase the market is experiencing.