The big test for the stock market comes with the release of unemployment figures, which probably has already occurred if you are reading this after 3 October. If unemployment comes in at better than last month’s 6.1%, what is also expected this month, there will be a serious problem for the stock market.

How is that? Do rich people only prosper when the working stiffs are suffering? The short answer is “no”, but the long answer is “yes”. It shouldn’t be set up that way, but the fragile bubble at the end of a 3 year long expansion in the S&P500 is kept aloft partly by Fed Action – and that comes to a halt as good news trickles in.

“This is how it is. Got it?”

There is a lot more to the Fed’s calculation than the headline unemployment rate, of course. Fed Chair Yellen has been unusually candid about what she wants to see improve, and what is certainly more important is the more comprehensive U6. If that falls under 12.0% we may indeed see the Fed pull back the very hot stimulus that has been running for six years now.

But that’s only part of the story for stocks.

One of the great stories of the last three years, at least, is that this Fed policy has been working – more or less. The S&P500 has never been up for three years in a row without at least some temporary pullback of 10% or more. This is one of many reasons why the CNN “Fear & Greed” index is at the lowest it’s been since they started this handy tool two years ago – registering “extreme fear”.

Also, it’s October. Bad things happen in October for a variety of reasons.

This is the season for worry.

It’s against this increased nervousness and volatility that we have to evaluate the potential effects of an economy that is finally starting to create enough work to go around. The Fed doesn’t have the ability to get money into the hands of people or create jobs directly – only the government can do that, and it’s been totally absent through most of this crisis. So we have the slow and ineffective lever of monetary policy that puffed up the stock market just a bit and, after many years, seems to have gotten things moving.

The main benefit has come to those who need it least, but some of it is getting loose and doing some good. It’s all been better than nothing.

The last time Barataria called the end of a bubble market was six weeks ago. Since that time the S&P500 went up 2.7%, but is now back down with a small net loss. There is no way anyone can time the market, but we can predict larger trends that we can expect to dominate over a longer period of time.

Banks won’t be offering money this cheaply ever again.

Rising interest rates are going to be a serious problem in a market that has not seen that happen for six years. When will it all come crashing down? It probably won’t crash, but settle back into the patterns established earlier in what is still a secular bear market – a market that has never really exceeded its 2000 highs in inflation adjusted terms.

Since this is not a bull market, but merely a rally in the middle of a long-term bear, we can expect that in the absence of stimulus everything will return to the “muddle through” low return that dominated the middle part of the last decade. There is a lot to sort out as we move on from a stimulus driven economy into something more normal.

It’s not as though there isn’t a lot of good news to go around. Capacity utilization is way up and layoffs are as low as they ever go. There are still a lot of good things happening, but that hasn’t been what has moved stocks to the level they are now.

Is this the start of a new bear market? No, it’s the continuation of the old one which we never really shook off. It’s really just the process of everything returning to the norm, which we have to expect. It all sets up the real secular bull market, which shouldn’t get started for a few years yet – after this all settles out. Then, we can talk about stocks.