Friday, December 3, 2010

Fed. Treasury holding vs. stock market

OK I just looked at the Zerohedge post with the below graph (between Fed's US Treasury holding, the S&P500 Stock Index) and I have a problem with it.


It implies that by simply observing Fed's holdings, we can forecast future market moves, easily as pie right? Not really. I've looked up Fed's weekly statistical release of US Treasury and Marketable Securities for International Accounts vs. the S&P500 index Exchange Traded Fund SPY since 2002, and here's what I found,

Top: SPY from 2002 to this week
Bottom: Marketable Securities for International Accounts (series 1) US Treasury and (series 2)

Nevermind the ugly graphic... we can see that the Fed's holding has ALWAYS increased over time, including 07 and 08 where the stock market experienced significant volatility jumps.

OK so does anything from the Fed's weekly report "work" with respect to stock markets?
Overnight Facility (lending),
Top: SPY from 2002 to this week
Bottom: Overnight Facility

As we can see, this has a significant negative correlation to the SPY, like the VIX and the implied correlation index KCJ. So there may be some use for the professional trader.

0 Reflections: