After a sharp drop in early December due to heavy Treasury borrowing, the Macro Liquidity Index (MLI) reversed as forecast. Large Treasury debt paydowns and Fed repos pumped cash into the markets beginning on 12/15. Foreign Central Banks (FCBs) joined the party with a massive buying binge pushing the MLI back to the record high levels hit in early December. The S&P remains at peak trend levels relative to the primary sources of macroliquidity that we can measure. The indicator has suggested since November that market risk is at an extreme, but we knew that conditions would probably not be ripe for a correction until January. January is here. Click here to download complete report in pdf format (Professional Edition Subscribers).
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