Data for the Fed's own portfolio show a sharp rise in Treasury holdings, both via direct purchase and through the Repo window for the week ended July 6. It was a larger than normal holiday liquidity injection. The data was released late yesterday, and no doubt caught public notice. There are one or two other positive divergences in the liquidity data, but it does not yet add up to a more compelling case for stocks from my perspective. Even so, it all represents the first good news on the liquidity front in over six months.
The way I align the liquidity data, it does not add up to a case for a low risk / high return market. So for now, I continue to play nickel / dime on the long side with a very large reserve. I have done no shorting since 2002, and have not given it much thought this year.
I plan to do a more thorough analysis of the market over the weekend.
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