Can Another Fed Handout to Wall Street Stop the Market Bloodbath?

The bulls are praying that stocks will rally this week for the simple reason that it is options expiration week.

The Fed almost always gives Wall Street extra money to play around with during options expiration.

·      On average the Fed expands its balance sheet by $9.1 billion during options expiration weeks.

·      During non-options expiration weeks, the Fed contracts its balance sheet by an average of $2.5 billion.

Below is a table of the changes in the Fed’s balance sheet. Options expiration weeks are gray.

Mind you, this is during a period in which the Fed is not engaged in Quantitative Easing or any other major monetary program. And yet… it still feels the need to hand off an average of $9 billion and change to Wall Street every time options expiration rolls around.

Note also, that the Fed gave Wall Street money almost every week during December 2015. For some reason Janet Yellen felt the need to expand the Fed’s balance sheet by $18 billion during the last month of a year in which most fund managers had performed terribly.

Despite this obvious gift to Wall Street, stocks finished 2015 DOWN. It was the first down year stock have experienced since 2008. And by the looks of the below chart, it’s only going to get worse in 2016!

Smart investors are preparing now.

We just published a 21-page investment report titled Stock Market Crash Survival Guide.

In it, we outline precisely how the crash will unfold as well as which investments will perform best during a stock market crash.

We are giving away just 1,000 copies for FREE to the public.

To pick up yours, swing by:

https://www.phoenixcapitalmarketing.com/stockmarketcrash.html

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

Comments

[Ethelred the Unready]

Worried about a complete collapse of HY.   Not sure what HY means which makes it doubly dangerous.  A Japanese Rock Band, High Yield, Holy Yoga?  

[madbraz]

usually don't read this guy's posts - pretty worthless.  but this is actually interesting information.  note also that during options expiration, we always have the big treasury bond auctions and FOMC announcements.  certainly not a coincidence and pathetic that it is not investigated, let alone condemned.

[RaceToTheBottom]

How much more can a balance sheet handle?

[Hitlery_4_Dictator]

Yes, it can.

[JRobby]

Unil the next time, say around April or May?

[the grateful un...]

the fed doesn't need a reason to give wall street money, it is remarkable that with a triple whammy on the market, oil prices, china, rate hikes with a gun to our head, that the market is behaving as nicely as it is. the stock market crash is what i call the flat crash, investors who thought they were going to get 8% a year come up 8% short. the flat crash will lull investors to sleep, the big crash is down the road a year or two, this is my research, this is 1996 when general equities diverged from gold mining. notice today that general market rallies are bad for the miners and the reverse. you can buy the miners defensively, and you can still get hurt owning defensive stock when everything goes down

for the record the fed is engaged in QE its in the form of RRPO, the reverse discount window.  its just not enough but QE is no longer the answer. QE feeds malinvestment and we are unwinding that (see energy) once again the bears are disappointed, the gold owners must wait, for the inflationary trigger, war in the ME or complete collapse of HY, right now its all orderly. orderly, bring me another GIN and QE, the punchbowl is getting weak.