 Hey everyone, this is Dan. After the last two FOMC meetings, the Fed confirmed their plan to reduce total assets by $47.5 billion each month for the months of June, July and August. That will be part of the quantitative tightening process, or QT, for the Fed to control inflation. June just ended a few days ago. Just like the Fed reduced total assets by only about $1.5 billion for the month of June, which is way short of the $47.5 billion target. What happened? Has the Fed given up and decided to go back to quantitative easing instead of doing quantitative tightening? How would a Fed's QT action, or lack of QT action, affect our investments? After digging into a lot of data, I found something very interesting. Let's get into the details. This is a table showing the weekly Fed total asset levels in the last 2-3 months. The numbers are published by the St. Louis Fed on a weekly basis. As we mentioned a minute ago, that the Fed's plan is to reduce total assets by $47.5 billion a month for the months of June, July and August. And also as of June 15, FOMC increased the Fed funds rate by 0.75%. That's all part of the quantitative tightening process. If you look at the Fed assets for the week ending June 29, it was at $8.913 trillion level. As of June 1, it was at $8.915 trillion. That means the reduction for almost the entire month of June was only $1.497 billion, which is very much short of the $47.5 billion target. What happened? Did the Fed give up on QT? I believe I found the answers from this chart, which is a daily chart for the ETF SPY, as you might know SPY represents the daily movement of the S&P 500. If you look at this particular weekly period ending June 15, the Fed injected a lot of money into the market by increasing total assets to the tune of $14.166 billion. Why did the Fed inject so much money into the market during that week? Now if you find June 15 on this candlestick chart for SPY, it's right here, this little green candlestick. The five days before June 15, we see five consecutive red candlesticks and definitely that was a very bearish sign, especially if you consider these two huge gaps. During the five-day period, the market dropped by about 11%. If you look at this chart ending one day before June 15, you would think that the market was heading for a free fall and I believe that was what the Fed governors saw as well. And I believe that's why the Fed jumped in and injected money into the market to prevent the market from continuing this free fall. And then sure enough after the money was injected, a couple days later the market started to recover and then finally the Fed felt comfortable enough for the week ending June 29 to pull out $20.79 billion. June 29 corresponds to this red candlestick here on the chart and sure enough when the Fed started to pull money out of the market, the market started to drop a little bit. Does that mean the Fed has given up doing quantitative tightening? No I don't think so. I believe what happened here during the month of June only indicates that the Fed is concerned about a potential free fall of the stock market even though the Fed is going to be tightening the monetary policy which will cool down the stock market. In other words what the Fed will be doing will be to bring down the stock market but I believe the Fed wants to bring down the stock market in a more controlled fashion rather than triggering a major market crash and that's why they injected money during part of June instead of pulling out $47.5 billion dollars. But I believe long term unless inflation gets within acceptable range the market will continue to go down because the Fed will continue to do quantitative tightening. If you look at year today, SPY representing S&P 500 has already come down by 20.19%, QQQ representing the movement of NASDAQ 100 has downed even more at 29.76%. Certainly the market has been going down as the Fed continue to increase interest rates and reduce Fed total assets. So how far would the market drop? I believe we can find some of the answers from this monthly chart for SPY. The RSI indicator is also plotted below this chart. Also last Friday the RSI value was at 46.7%. In the past 30 years covered by this chart only three out of points in history when we had monthly RSI value lower than today's RSI value. They were in 2001, 2008 and 2020 and of course you might recognize that in 2001 that's right after the dot-com crash 2008. That was a great recession triggered by the collapse of the CDO market and certainly 2020 was a pandemic crash. Now if you look at the unemployment rates during those three periods they were at 6.2%, 9.9% and 14.7%. What's an employment rate today? It's at only 3.6% and that's why I believe the Fed will continue to let the market go down in a control fashion rather than in a quick crash in order to control inflation and as long as the unemployment rate is within acceptable range the Fed will continue to engineer these market drops every once in a while until the inflation is within acceptable range. So when will the market recover? Of course when the Fed stops raising interest rates and stops quantitative tightening the market will recover but when will the Fed do those? First of all I believe CPI has to be less than 5% even though the goal for CPI according to the Fed is 2% but as long as CPI can get within 5% the Fed will declare short-term victory and think that there is enough downward momentum on a CPI that they will then ease up on quantitative tightening then the market will have the chance to recover or the other scenario which is not very desirable is if the unemployment rate is higher than 6% because with a high unemployment rate the Fed will be worried that in order to solve one problem which is related to inflation they might have triggered another problem which is high unemployment. At that point with high unemployment rate the Fed will certainly slow down the tightening process in order to increase employment in the economy and then after employment gets within a reasonable range then the Fed might continue to tighten if the inflation is still very high at that point. Overall I believe the market will continue to trend down in the next 2-3 months because inflation is still nowhere near the target range yet. The other possibility is that if the Ukraine war can come to an end in the next few months then certainly there will be a recovery of the stock market but it might be brief especially if after a couple months if the inflation rate is still very high then of course the Fed will still have to continue to tighten in order to bring down inflation but at least at the end of the Ukraine war we can see a brief rebound of the stock market. If you want to read more details about my analysis on this topic please refer to the video I posted on June 20th which you can find on my YouTube channel. At this point I'd like to remind you to also subscribe to my Twitter account which is DanMarketL with my Twitter account I share almost on a daily basis some of my trades with my subscribers for example on June 7th I tweeted that I bought SQQQQ the inverse ETF paid to the nest at 100 and three days later I sold half of the SQQQQ share at 14% gain. If you like what you've seen so far I'd like to encourage you to click the like subscribe and notification button that'll allow you to receive notification when I post my next video it'll also encourage me to make more videos like this in the future. As usual I very much welcome your comments questions and suggestions. I like to remind you that I'm not a financial advisor I share my stock trading strategies and analysis for educational and entertainment purposes only if you want to buy or sell stocks you should make your own decisions and you should definitely consult with your financial advisors before you do so. This wraps up my video for now I will chat with you again in the next few days. In the meanwhile I'd like to wish you the very best of luck with your financial investments.