Why Didn't $SPY break 390?
Been doing a lot research. What the expected behaviour last week and what actually developed, While not completely unexpected got me thinking why didn't things add up to getting the drop, Why didn't we actually have downside follow through and why were we getting so many strange signals. We correctly got long on failed break down reversal off 390 on reclaim of 392s, but it left a bad taste.
I think I found the answer, what the Fed is saying and what they are doing isn't jibing. at least not yet. Check this article out. https://tipswatch.com/2022/08/07/is-the-federal-reserve-really-tightening-so-far-not-so-much/
Is the Fed serious?
If the Fed isn't reducing their balance sheet, then tightening isn't really in effect. We are in binary event situation now, where we breakout higher or lower with upside target of retest previous highs of 478 or toward 300 on SPY. The next 2 weeks should set the tone next few months. If the Fed is serious about 2% inflation, they will need to be more aggressive. It seems to me they are trying to do this without major adverse effect to stock market (wouldn't surprise me right? how much wealth does upper Fed staff have tied to the market?) Does the Fed believe Inflation is coming down without strong intervention?
Is the bear market dump cancelled?
I still think the big crash can come but the premise/thesis for downside targets for me is that they will be reducing their balance sheet, and while they say 95B/mo that is 1T/year, then in theory it would be as much as 2 years of tightening. BUT they haven't even really started. They should already have reduced by 2-3% since Mar, but has dropped only 1% if that(based on their stated plans).
SPY is setting up a triangle pattern that seems to coincide with the FOMC date. Let's see what the coming week brings but at this point, without Fed "real action" I can't be as bearish as I was until 390 breaks or take a starter if we move back under 401 or reject 410.50 on a gap up.
