One indicator that we pay close attention to is the monetary base, the sum of currency and reserve balances at the Fed. Over the last two weeks the base has grown by $43B, about 1.5%. The base is important to us because of the relationship that it has had with commodity prices over the last several years. If the relationship holds, it might suggest that commodity prices like oil and gold will trend sideways rather than down.
As far as Fed Balance sheet trends go, it’s also worth noting that reserve balances continue to fall. The “reserve balances” line is a perennially misunderstood line-item, which is often used as evidence that excess liquidity is just being stored at the Fed rather than entering the economy. In actually the high level of excess reserves is just a symptom of QE because in the aggregate all of the reserves in the system must return to the Fed even if different banks hold them. At any rate, these reserves are now starting to be converted more rapidly into hard currency, which should render the argument over excess reserves moot.
Fed Liabilities Portion of Balance Sheet: