Monday, October 31, 2016

Fed Sold, Market Needs To Hold

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*Federal Reserve balances are in a clear downtrend this year.
*This can weigh on bond and stock markets.
*This is a key risk we need to watch and are using the level of 212 for SPY as a key guide.




While we think FOMC day and the post-elections market can be up, there are some nagging risks in the meantime. Federal Reserve balances coming down as reported Thursday after the close is a key risk. While we are bullish overall this is definitely an added weight to markets. We'd need the market to hold 212 (NYSEARCA:SPY) which we believe is a key level. For the record, we believe the market can hold it but we need to see it hold.
Here's last week's report of Fed balances which dropped from the week before.
TotalChangeWeek ChgYTD Chg
2016-08-244227711875610.08$5,665,577,8570.13%0.06%
2016-08-314212673983393.06-$15,037,892,217-0.36%-0.30%
2016-09-074212675983165.18$1,999,7720.00%-0.30%
2016-09-144232164926101.79$19,488,942,9370.46%0.16%
2016-09-214224034597317.01-$8,130,328,785-0.19%-0.03%
2016-09-284203567172677.74-$20,467,424,639-0.48%-0.51%
2016-10-054203569096955.29$1,924,2780.00%-0.51%
2016-10-124203569096956.38$10.00%-0.51%
2016-10-194215426351592.74$11,857,254,6360.28%-0.23%
2016-10-264200534019475.40-$14,892,332,117-0.35%-0.58%

Data Source: NY Federal Reserve
Federal Reserve balances dropped last week .35% and are down .58% for the year. These are the same balances that ballooned during the series of quantitative easing periods. These same balances are a key reason for the market to be up where it is today. Wiggles in these reserves have shown to wag the markets.
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