Market participants are often fooled by the dissonance of nominal yields versus real yields. Ie, what is the nominal return of the S&P, versus the return of the S&P per dollar that exists?
The money supply has become merely a proxy to supply hedgers against the dollar with scarce assets via cheap, practically free, dollars. But if you look at the real rate of dollars per S&P share, this seems to have been a leading indicator which preceded a period of decline. Not only is the divergence present, there's an overall dominant divergent structure that appears when you combine the trend of these singular divergences (purple). This is in stark contrast to the bull market in the 80s/90s (green). Very interesting.
Cheers and good luck out there!
The money supply has become merely a proxy to supply hedgers against the dollar with scarce assets via cheap, practically free, dollars. But if you look at the real rate of dollars per S&P share, this seems to have been a leading indicator which preceded a period of decline. Not only is the divergence present, there's an overall dominant divergent structure that appears when you combine the trend of these singular divergences (purple). This is in stark contrast to the bull market in the 80s/90s (green). Very interesting.
Cheers and good luck out there!
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Shocking imo
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I should have extended the green line in the original idea a bit to underscore the point of support becoming resistance, that's really what the chart is telling us. It looked ugly with the text so I took the text out and it should be a bit clearer.
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Note: "Bearish divergence" here means in nominal terms, we're not charting in nominal terms so this chart doesn't illustrate that, but it's important to note.
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Prediction moving forward