Abrazolica

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Here is a plot of the Fed balance sheet (blue line) and SPY (SPDR S&P 500) from Nov 1 2008 to yesterday (Feb 3 2011).

Note that SPY coming off its low in March 2009 was preceded by a sharp rise in the balance sheet. There is also a general characteristic of SPY dropping when the slope of the balance sheet decreases. An exception is the steep climb in SPY that started in early September 2010, when the balance sheet's slope had flattened. This corresponded to the speech Bernanke gave in Jackson Hole on Aug 27 2010, providing reassurance that the money printing would continue.

So, barring unexpected external shocks, we can expect SPY to grow as long as there is the EXPECTATION that the money printing will continue.