The Fed Net Liquidity indicator is a concept discovered by Max Anderson to calculate the fair value of SPX ( S&P 500 Index ). The formula he shared on Twitter uses the Fed Balance Sheet , TGA (Treasury General Account), and Reverse Repo. The data for each component above is accessible on the FRED website.
Net Liquidity = Fed Balance Sheet - ( TGA + Reverse...
Net Liquidity: It's calculated as:
⬆️ Size of the Fed's Balance Sheet (WALCL)
⬇️ Minus how much of that has been sucked out into the Treasury (WTREGEN)
⬇️ Minus how much has been sucked out into Reverse Repo (RRPONTSYD)
Apparently predicts direction of SP500 with high accuracy
