The Gilmo Report

January 22, 2020

January 22, 2020

You can’t keep a good trend down. That’s the motto of this market, as a one-day sell-off yesterday, good for a distribution day, was met with a sharp rally this morning. However, today’s bid for yet more new highs was turned back as the NASDAQ Composite Index stalled and closed below its opening gap-up levels on lighter but above-average volume.



The S&P 500 and Dow indexes also stalled off their opening highs, with the Dow closing down -9.77 points. Of the two, only the S&P was turned back on a bid for new highs.

To understand why this market doesn’t quit, or at least hasn’t quite yet, one only needs to understand the chart below showing the changes in the level of the Fed’s balance sheet. The Fed began expanding its balance sheet, effectively pumping liquidity into the system starting back in September. You’ll notice that the balance sheet expansion perfectly correlates to the current market rally.

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