Equity markets fell for the 2nd day as traders assessed the latest economic data and FOMC activity. The takeaway is that inflation puts the economy on the brink of an actual recession, and the FOMC is still raising interest rates. The committee wants to ensure inflation is tamed, which will most likely trigger the recession everyone fears. Regardless, the S&P 500 is in the first inning of what could be a prolonged earnings recession that has been sparked by a decline in volume brought on by high prices and high-interest rates.

Friday's action will be critical for the market. The S&P 500 index confirms the presence of resistance at the 41,50 level, which may lead to another big sell-off. The rally may continue if the market can rebound and close even near the week's high. If not, investors should brace for another sell-off that could shave 15% to 20% off of the major indices by the start of spring. January effect or not, the outlook for S&P 500 earnings is moving lower, leading the market lower.