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Monday, April 9, 2012

Moneystream 1940s

In 1942 the market started another big rally.  I think market participants decided the allies were going to win the war and started bidding up prices.  Notice in the chart below how the moneystream indicator kept rising strongly with price into the high of 1946.  The indicator was much stronger then in the 1933-37 rally.

In the late 40s the volatility died down considerably.  This is often a sign the secular bear market is coming to an end.  Notice how the chart above shows the price line going mostly sideways from late 46 through late 49.  During that sideways pattern the moneystream indicator was clearly above its 22 MA.  In 1948 it even moved up above the 1946 high, even though price did not.  During the pullback in late 48 and early 49 the Dow went back down to around the same lows as in 46 and 47.  However,  the moneystream indicator made a clear higher low.  This indicator was showing strength not seen in the underlying price of the Dow.  Was this a sign of things to come?  Check out the chart below.

The Dow made steady upward progress all through the 50s.  Clearly the moneystream indicator was showing hidden strength n the late 40s.  It stayed above its 22 MA the entire decade.

The decade of the 60s had some very interesting action.  The chart below shows a pretty big dip in 1962 corresponding to the Cuban missile crisis.  Notice the moneystream indicator never even got close to its 22 MA.  The market turned back up and recovered the loss fairly quickly. 

However, notice how the sell off in 1966 sent the moneystream below its 22 MA for the first time since the 1940s.  Was this some kind of warning about what was coming?  That is 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.