The chart below is of the S&P 500 since August of 2005 (as far back as the Fed’s POMO Database goes). The indicator on the bottom of the chart shows the total amount that the Fed either pumped into or withdrew from the system through POMO activity over the last month. (Running 20-day total par accepted.)
(CLICK CHART TO ENLARGE)
Note how the market has performed in accordance with past POMO activity. According to the Fed’s website, they are tentatively slated to perform buying every trading day from now through December 9th. Either Tuesday or Wednesday we should see the 20-day running total as shown on the bottom indicator exceed the highest levels in 2009. Based on the above chart, (and a number of studies I’ve conducted) it appears the old adage “Don’t fight the Fed” still holds true. If this is the case, then the Fed’s recent and scheduled activity should act as a bullish influence in the days and weeks to come.