Moneystream 1980s

As the chart below shows, the crash of 1987 took the moneystream below its 22 MA.  This was a serious penetration, but nothing bad happened to the economy in the process.  If I was looking at this in real time it would make me a bit cautious.  The key is what happens on the first real rally attempt after a crash.  In this case, the market was upward and onward.

As the chart below shows, the market and moneystream recovered over the next 2 years.  The moneystream was not particularly strong and the upward progress for the Dow was slow.  The drop in 1990 briefly took the moneystream below its 22 MA. Once again the market recovered to new highs.  The Dow continued its slow upward progress in the early 90s and so did the moneystream.  It was not until 1993 that the moneystream finally took out its 1987 high even though the Dow had done so in 1989.  By 1994 the moneystream was really gaining some enthusiasm.  You can see a big separation from its 22 MA.  This set the stage for the rip roaring market starting in 1995.

We can see in the chart below that the middle 90s saw a big move up in both the Dow and the moneystream.
The sell off in 1998 was around 20% and took moneystream marginally below its 22 MA again.  However, the rally in late 1998 and early 1999 took moneystream back up through its MA and to new highs along with the DOW.

So we have seen how the secular bull market in the 80s and 90s played out with the moneystream.  There were a few scary sell offs, but the market always recovered.  Even though the moneystream penetrated its 22 MA a few times, there was never any follow through on the down side.  Things were very different after 2000, but that will be the topic for next time.

Bob