Something remarkable happened when the Fed announced "NOT QE": starting that week, every time the Fed's balance sheet rose, so did the S&P. And the one week when the Fed's balance sheet shrank, the market dropped. Yes, the correlation may not be causation, but if a pattern repeats 9 weeks out of 9, then it becomes a feedback loop which the math PhDs plug into their various algo/quant models and... voila:
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Which begs the question: yesterday we reported that as part of its year-end repo bailout operation, the Fed plans on injecting over $500 billion of liquidity in the next 4 weeks, a process which will take the Fed's balance sheet sharply higher by roughly $500 billion through mid-January, in the process pushing the balance sheet to a new all-time high above $4.5 trillion. We wonder: just what will happen to stocks?
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