Thursday, January 31, 2019

#S&P500 Review $SPX $SPY Don't Blame the Fed

SP 500 Review
Those that view the message of the market on daily basis are likely confused by trading noise. While trading noise contributes to the long-term trends, it does not define them. Human behavior tries to explain trading noise as a meaningful trend. This confuses the majority which, in turn, contributes to their role as bagholders of trend transitions.

S&P500's overall trend, revealed by trends of price, leverage, and time, defined and are discussed in The Matrix for subscribers.

Subscriber Comments

The talking heads are screaming that the Fed caved to stock market volatility. The steep decline in US stocks from September to December, a trend that's still recognized as cause building (consolidation) and not mark down (bear), forced Powell from hawkish to dovish. My only response, is do your homework. The Fed doesn't care about the stock market, or at least not to the degree the talking heads describe it. The Fed is worried about economic growth, which in today's interconnected global economy means both domestic and global growth. The US and global economy are slowing. The latter is slowing at a much faster rate. The Matrix confirms that. The Dow Industrials are leading. Small caps are lagging. Junk bonds are lagging. Numerous economic, stock, and bond market intermarket trends paint of picture of RISK-OFF regardless of what the talking heads are saying. I give Powell credit for at least recognizing it.

Will stocks continue to rise as the economy weakness. Maybe. I doubt the public realizes the extent of RISK-OFF money flows in play. They could be big, panicking sellers if the economy trends force a rethink of the "goldilocks" economy.

A global contraction, however, may not sends stocks lower. What choices does the world's capital have? The US dollar is the only game in town until the monetary system resets. Dollars need a place to park. Bonds? Nope, they're part of the problem in an evolving debt crisis. Real estate? Historically, yes, but taxation will likely strangle all but low tax zones - few exist in the United States. Commodities? It's coming. Gold? Yes, but it's too small of market. Stocks? Likely the only clean alternative to bonds. This means dollar, gold, and stocks could rally together as a crisis hit, evolves, or matures within this cycle or the next.

If you're bitching about the Fed, you're missing the bigger trends. The Fed's role as a provider of liquidity to the private sector during a crisis doesn't exist as long as it's forced by US public sector debt. End the Fed, ha. How about return to Fed to its original role? That requires understanding of history, not conspiracy theories.

Follow me on Twitter or facebook for further discussion.

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Market-driven money flow, trend, and intermarket analysis is provided by an Insights key.