It is by now well-known that the general level of the stock market no longer has any impact on retail flows in or out of stocks, having become a one way street out of equities beginning roughly six years ago, with the proceeds invested into fixed income (a paradox much to the chagrin of the Fed which keeps hoping positive equity dividend yields will prove a sufficient motive for investing in a world where interest income is now zero and has taken away $400 billion in purchasing power each year) and only institutions, mostly Primary Dealers and other entities "close" to the Fed's freshly printed money, and central banks are propping up the stock market.
However, one place where the S&P level still does have a modest influence is the number of shorts in the market, which are strategically used by repo desks and custodians (State Street and BoNY), to force wholesale short squeezes at given inflection points, usually just when the bottom is about to drop out. The problem is that even short squeezes are increasingly becoming fewer and far between, for the simple reason that the Fed has managed to nearly anihilate shorters as a trading class with its policy of Dow 36,000 uber alles. This was demonstrated with the latest NYSE Group short interest data, which tumbled to 13.6 billion shares short as of the end of September, or the lowest since early May, just as the market was swooning to its lowest level of 2012 to date.
Since the Fed desperately needs inexperienced, "weak-hand" shorts to reenter stocks to facilitate its "transmission mechanisms" (all of which can be summarized in two words: "stock ramps"), and since the only time shorts re-enter the market, even against their and everyone else's better judgment, is just after major market tumbles, expect the Fed to prepare for some more stock market acrobatics whose sole purpose is to get a fresh batch of shorts in, just so the squeeze trap can be replayed over and over, as it has been for the past 4 years.