The stock market has been sensitive to changes in the
levels of Fed Credit and the Adjusted Monetary Base (AMB)
since mid-2003. This has been so because traders have
taken to monitoring The Federal Open Market Commitee's
doings carefully as the economy has expanded to glean
changes in monetary policy. The Fed has tightened up
gradually on liquidity since late 2003, and took a
tough line in 2005, until Katrina etc. forced it to
ease up some. The periodic increases to Fed Credit
via reserve injection have led stock and gold traders
particularly to celebrate. Each stock market rally
since Half 2 '04 has been triggered off by FOMC
Treasuries purchases which have quickly showed up in
the AMB.

It is too early to tell yet whether the Fed will extend
the moderate net easing of recent months, although
seasonal factors mitigate against it. Moreover, traders
should note that the stock market is about as extended
as it has been against the trend of the AMB since traders
jumped on the monitoring program after late 2003. Fed
Credit and the AMB do go out of favor as key variables
from time to time, but traders should keep them in mind
now, since the inclination to determine an interim top
in market short rates is running strong at present.

Well, with this piece, I am content to leave the monetary
data alone for a few weeks to look over some other stuff.