SPX – Dovish Fed, Negative Liquidity, and the Next Trigger

The S&P 500 sits near 6,435, holding steady at highs while the liquidity backdrop remains negative. This divergence between price and plumbing sets up the next major move.

Macro backdrop:

The Advanced Fed Model (AFDFM) signals a dovish/easing regime, with moderate strength.

Liquidity, however, is still draining. Treasury’s cash account (TGA) remains elevated, while the Fed’s RRP facility continues to park trillions. Together, these offset easing policy tone.

Net liquidity (BML variation) = –2.14%, a headwind for equities.

Implication for SPX:

Liquidity and SPX correlation has weakened. Historically, that does not last long. Either liquidity improves, or price resets lower.

Key support sits at 6,350. A sustained break below would open 6,200.

On the upside, a liquidity turn (TGA drawdown + RRP decline) would support a breakout toward 6,500–6,550.

Conclusion / Trade View:
The market is balanced between a dovish Fed tone and restrictive liquidity mechanics. As long as SPX holds above 6,400, the structure favors upside, but liquidity needs to flip to sustain momentum. Watch for the next liquidity shift as the trigger.

Disclaimer: For educational purposes only. This is not financial advice.