Fed Increases Balance Sheet $2.4 Billion, Mostly MBS

The Fed increased its balance sheet by $2.4 billion last week, with only $49 million of that treasuries. The S&P 500 Index increased 44 points.

Next week is a big Treasury maturity day, August 15, and it will fall within the reporting period. The Fed has $44 billion ($2 billion leftover from July and the increase this past week) to reduce over the next three weeks, and another big Treasury maturity data on August 31.

The weekly correlation still holds up. If long-term correlation reasserts and the the S&P 500 "catches-down" to the balance sheet, it is currently "overvalued" by more than 10 percent.