Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

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.


© 2005-2022 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