A few days ago, I read a premium article over ZeroHedge, which went into great detail as to why the three components of what I call the Fed Spread – – most notably, the balance sheet – – render all the Q.T. the Fed is doing moot. In other words, by their arguments, the market was going to roar higher this year anyway. I confess, I felt pretty empty-headed reading the article because it didn’t sink in, although it was enough to strike fear into this bear’s heart.
I was reminded of this just now since it looks like our prediction of near-term S&P prices increased. It’s still beneath present price levels, but the gap is getting smaller. Here are the three individual elements:
Once they’ve been through the food processor, we can see the two-week target for the is 3846, which isn’t exactly exciting.
The red shows the spread, which is still reasonably meaty.
The next Fed meeting (which will be its first of 2023) is only nine trading days away, and between now and then, there are hundreds of high-profile earnings reports. There should be plenty of rough seas ahead.
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