The Fed’s Balance Sheet Is Driving The Stock Market

The Fed’s Balance Sheet Is Driving The Stock Market

The Federal Reserve balance sheet totaled $4.17 trillion as the stock market was declining on February 17. At the March 23 lows for the major equity averages the balance sheet was rising at $5.25 trillion. On June 8, the balance sheet peaked at $7.17 trillion as the major averages set cycle highs. On June 29, the balance sheet slipped to $7.01 trillion. The increasing balance sheet clearly was a factor that drove the stock market higher.

Federal Reserve

The stock market has been led by the Nasdaq Composite, which set its all-time intraday high of 10,576.75 on July 9. It's time to book some profits as its semiannual risky level at 10,639 should limit the upside.

A technical warning is that the Nasdaq has a 12x3x3 weekly slow stochastic reading above 90.00 on a scale of 00.00 to 100.00. This puts the Nasdaq under a warning I call an inflating parabolic bubble formation.

The daily charts for the other major averages show technical warnings.

The Dow Jones Industrial Average shows an island reversal and is trading below its 200-day simple moving average at 26,228. There was a price gap higher on June 5 then a price gap lower on June 11. The cycle high was