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Monday, April 9, 2012

Moneystream 1960s

The chart below shows the sell off in 1966 was short lived despite the moneystream dropping below its 22 MA.  The market rallied in 1967 and so did the moneystream indicator.  It actually bettered its 1966 high on this rally even though the Dow did not.   In 1968 as the Dow got up to its 1966 high, the moneystream made it above its 1967 high.  At this point the moneystream seems to be showing relative strength to the Dow.  This era was pretty tumultuous with the Vietnam war going on.  The market turned back down again instead of breaking out above that 1966 high.  The moneystream dropped back below its 22 MA in 1970.  However, it stayed above its 1966 low even though the Dow dropped below its comparable low.  The moneystream was still showing relative strength.

The chart below shows that in the early 70s the Dow rallied again and even eclipsed its 1966 high slightly.  Again the moneystream was very enthusiastic as it climbed above its highs from the 60s. Clearly the indicator was acting very different then it did after the crash of 1929.  Look at the big drop in the chart below from the early 1973 high into 1974.  The Dow was down more then 40%, but the moneystream did not collapse.  It was still showing strength not apparent in the index itself.

One thing I find very interesting is the rebound that started in 1975.  The Dow actually made it back above the 1973 high in less time then it spent going down into the 1974 low. Generally the market goes down much faster then it goes up so this was an unusual move.  In 1976 the moneystream was showing a lot of enthusiasm as it kept making new highs even though the Dow itself was only testing prior highs.  All through the rest of the 70s and early 80s the moneystream  just kept going up.  It was clearly showing relative strength to the Dow since the late 60s.

We know the biggest secular bull market in history started in 1982.  Clearly that move did not just happen out of the blue.  The exuberant action in the moneystream shows the market was well setup for a big rally.  That move up will be the subject for next time.


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.