Tuesday, October 25, 2016

Fed's Buying: Bullish For Stocks

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*Fed balances moved back up.
*That can support markets.
*Our recent call identifying a Fed balance decline preceded a market decline.




We've been tracking Federal Reserve balances. They've led stock market (NYSEARCA:SPY) moves. The Fed had a big purchase last week which can support markets.
Let's first look at the recent data.
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%

Source: New York Fed
After a big decline the week of September 28th the recent report jumped back up.
Here's the chart showing the market turning down after the last big drop in Federal Reserve balances.
We previewed this S&P move down with a report October 6th saying, "Fed Sold The Most Since 2012."
Source: FreeStockCharts.com
Above you have the chart of the S&P 500 ETF SPY. Since the reduction in Fed balances in late September the market followed with weakness.
Last week's jump back up can lead to market support or strength.
Historical Relationship Between Fed Balances And S&P 500
There has been a strong relationship between Fed moves and stock market reactions.
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