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Bullish Case: With the Fed potentially maintaining interest rates, market optimism could grow, driving SPY toward historical upward momentum, as indicated by the return surface showing positive returns for 1 to 2-year holds in favorable market conditions.

Bearish Case: Persistent inflation concerns and geopolitical tensions may lead to sudden downturns, as evident in flattened recent price action around key support levels like $550. These factors could trigger increased volatility and market sell-offs.

Potential Outcomes:

1. 50% chance SPY rallies if Fed holds rates.

2. 30% chance of volatility spikes from potential rate hikes.

3. 20% chance of a deeper correction due to persistent inflation fears. These outcomes hinge on upcoming inflation data and Fed guidance.

Trading Oracle: Consider deploying bearish credit spreads on SPY as volatility increases due to macroeconomic concerns, targeting $550 as a key level. Focus on shorting near-the-money options, optimizing risk/reward with limited exposure. A time horizon of 1-2 months aligns well with expected volatility spikes.

September 11, 2024