SPX – Fed Model vs Liquidity: Hawkish Hold Meets Negative Flow

The S&P 500 holds near 6,435, but the backdrop is shifting. Fed tone, liquidity, and sentiment are no longer aligned, leaving SPX caught between support and resistance.

1. Fed Model (AFDFM)

Index = –2.78 → weak hawkish bias.

Policy regime = easing, but signal shows a falling trend.

Probabilities: Hold = 60%, Cut = 40%, Hike = 0%.

Inflation easing (Core PCE 0.34%), unemployment stable (4.2%), but Fed Funds still elevated at 4.33%. Policy remains restrictive compared to the Taylor Rule (~1.8%).

2. Liquidity (BML)

Net liquidity variation = –2.14% → negative.

TGA high + RRP large = drain on market cash.

Until liquidity turns up, upside momentum in equities stays capped.

3. Macro Risk Sentiment

Risk On/Off index slipped back below 0 (–0.45).

Summer highs near +1.5 showed strong appetite, but enthusiasm is fading.

Without liquidity improvement, sentiment is unlikely to push higher.

4. SPX Levels

Support: 6,350 → a break below risks 6,200.

Resistance: 6,500–6,550 → needs liquidity improvement to sustain.

Conclusion:
Fed tone = dovish to neutral, but liquidity = negative. That divergence is why SPX is stuck near the highs. A liquidity flip (TGA drawdown, RRP decline) is the trigger for the next breakout. Until then, expect range trading between 6,350 and 6,500.

Disclaimer: This is educational analysis, not financial advice.