Friday, August 5, 2022

SPX, TLT, BKX: Might as Well Face It, You're Addicted to Liquidity

This morning, bulls are being reminded that maybe they shouldn't have stayed up all week partying, as the Non-Farm Payroll Report came in at double the expectation.  This suggests the Fed can keep raising rates at its current pace without so much as a worry or a second thought.  Which, of course, means liquidity will continued to tighten -- which in turn means less money to throw around the stock market.

As we talked about last week, if "bad news is good" for the market, then this good news is bad.  It all comes down to Fed liquidity, especially for a market that has been addicted to it since at least 2009.  

Chart-wise, SPX managed to peek above black, but the back-test always determines whether such a move is a head-fake or the real thing:

TLT is interesting here:

And BKX remains in the same place, and is still the "hmm, maybe we shouldn't open the champagne yet" in the bulls' near-term party:

In conclusion, no real change from the last few updates.  The futures market sold off sharply on the NFP report, but bears do need to turn this into an impulse down.  If bulls hold it to an ABC down, then they may keep the party going a little bit longer.  Trade safe.

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