Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
WAYS TO SECURE YOUR FINANCIAL FUTURE - 20th Aug 19
Holiday Nightmares - Your Caravan is Missing! - 20th Aug 19
UK House Building and House Prices Trend Forecast - 20th Aug 19
The Next Stock Market Breakdown And The Setup - 20th Aug 19
5 Ways to Save by Using a Mortgage Broker - 20th Aug 19
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19
Central Banks Move To Keep The Global Markets Party Rolling – Part III - 14th Aug 19
You Have to Buy Bonds Even When Interest Rates Are Low - 14th Aug 19
Gold Near Term Risk is Increasing - 14th Aug 19
Installment Loans vs Personal Bank Loans - 14th Aug 19
ROCHE - RHHBY Life Extension Pharma Stocks Investing - 14th Aug 19
Gold Bulls Must Love the Hong Kong Protests - 14th Aug 19
Gold, Markets and Invasive Species - 14th Aug 19
Cannabis Stocks With Millennial Appeal - 14th Aug 19
August 19 (Crazy Ivan) Stock Market Event Only A Few Days Away - 13th Aug 19
This is the real move in gold and silver… it’s going to be multiyear - 13th Aug 19
Global Central Banks Kick Can Down The Road Again - 13th Aug 19
US Dollar Finally the Achillles Heel - 13th Aug 19
Financial Success Formula Failure - 13th Aug 19
How to Test Your Car Alternator with a Multimeter - 13th Aug 19
London Under Attack! Victoria Embankment Gardens Statues and Monuments - 13th Aug 19
More Stock Market Weakness Ahead - 12th Aug 19
Global Central Banks Move To Keep The Party Rolling Onward - 12th Aug 19
All Eyes On Copper - 12th Aug 19
History of Yield Curve Inversions and Gold - 12th Aug 19
Precious Metals Soar on Falling Yields, Currency Turmoil - 12th Aug 19
Why GraphQL? The Benefits Explained - 12th Aug 19

Market Oracle FREE Newsletter

The No 1 Gold Stock for 2019

Stock Market Sentiment and Monetary Aggregates - Watch Out Paperbugs!

Stock-Markets / Money Supply May 02, 2010 - 04:15 PM GMT

By: Adam_Brochert

Stock-Markets

Best Financial Markets Analysis ArticleThe whole M1/M2/M3/MZM (among others) monetary aggregate thing is pretty dry and I am no expert on which one is most important and the fine distinctions between them. It's all paperbug drivel to intellectualize an unsustainable debt-backed paper currency system in my opinion. However, one thing is clear: when the higher monetary aggregates (e.g. M2 and M3) start declining precipitously, you can bet a recession is on the way with a high probability of being right.


The rate of change of money and credit is an important concept to me. If access to money and credit is abruptly cut-off (like over the past 2 years), the economy gets temporarily choked off. If the market is abruptly flooded with money and credit, a cyclical recovery is likely already in progress. There is a lag and the relationship is not 1:1 or even tradable really, but current monetary data are one more bearish piece of information confirming that an important top in the general U.S. stock market is building.

Following is some M2 and reconstructed M3 (M3 is no longer published) data in chart form. First is M2 using the year-over-year percentage change from a federal reserve website, and following that an M1, M2 and reconstructed M3 from shadowstats.com:

And from the fed website for perspective, here is a chart of the now discontinued M3 series year-over-year rate of change from 1960 thru 2006:

This is why the fed is not all-powerful. They can increase base money at will and engage in illegal back door monetization at will and with no oversight - in other words, way too powerful but not all-powerful. However, the multiplier effect requires willing lenders and borrowers. When that doesn't occur, the thought is that government should take on more and more debt to "stimulate" the economy and "pick up the slack." This is retarded, but it is our current system. The real economy is withering on the vine even as the too-big-to-fail banking system is being made partially whole at the taxpayers' expense and most of the major governments around the world are setting themselves up for Greek-style debt crises. Remember that corporate profits outside of the largest firms sucking on the government teat require actual healthy economic activity once costs (including employees) have been cut to the bone.

The number of New York Stock Exchange ($NYSE) stocks above their 200 day moving average ($NYA200R) is waning and looks set to plunge. Here's a 5 year weekly candlestick chart of the action:

And here's the current Investors Intelligence data regarding bullish versus bearish sentiment with a chart over the last 4 years to provide some perspective on the current data points (chart from market-harmonics.com):

Speaking of sentiment screaming that a top of importance is at hand in the general stock markets, how about a few more charts from market-harmonics.com. The most insane is the NASDAQ sentiment index:

Let's party like it's 2000 in tech stocks, eh? Totally ridiculous and setting retail investors up for big losses. How about the options buyers sentiment gauge being at new bullish sentiment highs for this bear market:

And I posted a different version of this chart a few weeks ago, but one more time here is the CBOE equity put to call ratio:

Now that everyone is so bullish, I can't imagine what could possibly go wrong - hmmmm. I guess we'll find out as the Dow to Gold ratio works its way back to 2 (and we may well go below 1 this cycle). Gold up, Dow down coming soon to a market near you. The secular general stock bear market is far from over - don't lose the forest thru the trees. The few stock market bears left could be about to have a field day, as everyone may panic quickly when we start heading down again.

Finally, I leave you with some Sunday morning fractal chart porn. Here's the current reflationary cyclical bull market using an 18 month candlestick daily chart:

And here's a WEEKLY chart of the last cyclical bull market in the S&P500 from 2003-2007 when we had more ammunition to stimulate the economy with and more room to increase debt in the private and public sector:

Visit Adam Brochert’s blog: http://goldversuspaper.blogspot.com/

Adam Brochert
abrochert@yahoo.com
http://goldversuspaper.blogspot.com

BIO: Markets and cycles are my new hobby. I've seen the writing on the wall for the U.S. and the global economy and I am seeking financial salvation for myself (and anyone else who cares to listen) while Rome burns around us.

© 2010 Copyright Adam Brochert - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules