What goes up, must come down, at least in theory.

Ever since the start of October when the Fed launched QE4 - or as some still call it "Not QE" - in response to the Sept repo crisis, figuring out the market has been pretty simple: if the Fed's balance sheet goes up so does the S&P500, and vice versa.

The good news for traders is that for the past three months, the Fed's balance sheet rose 11 of 12 weeks, and declined just 1 of 12, and magically, the S&P did just that as well.

However, now that the year-end repo scare is history at least until the April 15 tax date and certainly the next year end, it's time for the Fed to start shrinking its balance sheet, mostly by allowing existing term repo operations to expire without being rolled over. Conveniently, the FOMC Minutes released moments ago provided the Fed's own big picture take on when the massive liquidity injection since mid-September, which expanded the Fed's balance sheet by $415BN in three and a half months...

... with the Fed pointing out its "expectations to gradually transition away from active repo operations [in 2020] as Treasury bill purchases supply a larger base of reserves" and specifically, "the calendar of repo operations starting in mid-January could reflect a gradual reduction in active repo operations."

None of this is new, and it has almost become conventional wisdom that when the Fed starts draining liquidity, the market impact will be the polar opposite of what happened when it was injecting liquidity: i.e., stocks will drop.

So with the Fed highlighting mid-January as the period when the liquidity injection goes into reverse, here is some more details on just which dates will be critical: as Curvature's Scott Skyrm points out, these will be the days when the Fed's term repos maturing over the next few weeks, supposedly without being rolled into further term repos, or as he puts it, "during January, it will be interesting to see how the market reacts to the term RP ops maturing:"

$25 billion leaves the market on Monday,

$28.8 billion on Tuesday,

$18 billion next Friday, etc.

Said otherwise, just next week the Fed will drain nearly $72 billion in liquidity if term repos aren't rolled.

Of course, perhaps "interesting" is not the right word, because it is clear that if liquidity is drained without a matching injection, the market reaction will be anything but favorable. That said, the Fed still has more term Repo ops scheduled to correspond with those term roll-off dates, with at least three more term RP ops of up to $35 billion scheduled in January. Whether or not banks decide to use these to roll existing maturing term repos will determine if the liquidity cliff starts hitting next week, or 3-4 weeks later. Finally, it will also depend on whether the Fed decides that it had overinjected the market with liquidity, and if it announces even more scheduled term repos in February and onward.

For now, however, here is a visual calendar of when some of the key December term repos mature over the next few days: