TSP Quicklook: 18 February 2022

There is little support below 4300 in the SP500. The market is retesting this low. It reached 4328 intra-day on Friday and closed at 4349. It would not take much to move it below this line in the sand next week… like maybe Russian tanks entering Ukraine over the weekend.

This week was options expiration week. The last 6 out of the last 8 were down into Friday often bottoming on the following Monday. What will this Monday bring?

The market could bounce Monday and rally. There is nothing saying that now is the time the market will break support, but it will in time.

Interest rates are rising due to inflation. The Fed ends QE (suppressing long term interest rates) next month after many years of holding them underwater( under inflation). They can not allow rates to climb all the way to inflation levels and they are praying inflation comes down on its own.

In other words, while I pray for a full reset and normalization of the financial system to save the middle class, the Federal Reserve and the monied elite hope to keep their gig going with little pain to themselves. It really is one or the other now due to inflation.

Inflation makes their gig difficult to sustain. Why? Inflation is delivering deep negative REAL yields on savings, pensions, and sinking wage gains. And if you do not get at least a 7% wage increase for inflation this year, you are getting a pay cut in terms of purchasing power. The rich are just getting wealthier sitting on the beach.

I hate to tell the Buy & Holders this, but the Federal Reserve appears to be coming to the conclusion that to avoid raising interest rates above the level the govt can afford, they need to induce a recession on the demand-side of the economy. And since most retail demand comes from the top third of wealth, a nice deep stock market correction would do the trick. A reverse wealth-effect.

Some even think it could bring retirees back to work. Bitcoin millionaire babies may need to start working. The Fed whispers may be right. I think we will find out.

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Categories: Perspectives