S&P 500 Index versus M2 Money Velocity

S&P 500 Index versus M2 Money Velocity

 S&P versus M2 Money Velocity

h/t @Vconomics

below a look at the relationship between the M2 Money Velocity and the S&P 500 Index ..

Note there is a lag of 4 months between the M2V and the SPX data , for example: the current M2V data as on 31 Jan 2014 , is from the 1st Oct 2013 .

Here are the 2 possible relationships

1) M2V decreases from the previous quarter , while the SPX increases from the previous quarter . ( current scenario as on 31st Jan 2014) 

below the trading odds for forward SPX 3 month returns , for longs , data since 1960.

  • Winners : 47
  • Losers : 19
  • % Winners : 71%
  • Average Change % : 3.09
  • Median Change % : 3.33
  • Maximum Gain % : 15.17
  • Maximum Loss % : -11.03
  • Average Gain %if Winner : 5.76
  • Average Loss % if Loser : -3.49
  • Payoff Ratio 1.65

2) the NOT of – M2V decrease from the previous quarter , while the SPX increase from the previous quarter . 

3 possible combinations , a) M2V increases , SPX Increases , b) M2V decreases, SPX decreases, 3) M2V increases , SPX decreases

  • Winners : 87
  • Losers : 58
  • % Winners : 60%
  • Average Change % : 1.31
  • Median Change % : 1.63
  • Maximum Gain % : 24.87
  • Maximum Loss % : -23.56
  • Average Gain %if Winner : 5.94
  • Average Loss % if Loser : -5.63
  • Payoff Ratio 1.05

Below the historical instances of ,  M2V decreases from the previous quarter , while the SPX increases from the previous quarter , since 1960 , and the forward three months.

Date M2V Month SPX Close M2V % SPX % next 3 month returns
01-Oct-13 1.566 Jan-2014 1782.59 -0.45 1.48 ??
01-Jul-13 1.573 Oct-2013 1756.54 0.00 4.20 1.48
01-Apr-13 1.573 Jul-2013 1685.73 -0.38 5.52 4.20
01-Jan-13 1.579 Apr-2013 1597.57 -0.94 6.64 5.52
01-Oct-12 1.594 Jan-2013 1498.11 -1.67 6.09 6.64
01-Jul-12 1.621 Oct-2012 1412.16 -0.73 2.38 6.09
01-Jan-12 1.644 Apr-2012 1397.91 -0.48 6.51 -1.33
01-Oct-11 1.652 Jan-2012 1312.41 -0.30 4.72 6.51
01-Jan-11 1.721 Apr-2011 1363.61 -1.32 6.03 -5.23
01-Oct-10 1.744 Jan-2011 1286.12 -0.06 8.69 6.03
01-Apr-09 1.71 Jul-2009 987.48 -1.44 13.14 4.93
01-Jan-09 1.735 Apr-2009 872.81 -4.20 5.68 13.14
01-Jan-08 1.941 Apr-2008 1385.59 -2.02 0.51 -8.53
01-Jul-07 1.986 Oct-2007 1549.38 -0.55 6.47 -11.03
01-Jan-07 2.005 Apr-2007 1482.37 -0.25 3.07 -1.83
01-Oct-06 2.01 Jan-2007 1438.24 -0.50 4.38 3.07
01-Jul-06 2.02 Oct-2006 1377.94 -0.69 7.93 4.38
01-Oct-05 2.019 Jan-2006 1280.08 0.00 6.05 2.39
01-Apr-03 1.921 Jul-2003 990.31 -0.72 8.00 6.10
01-Jan-03 1.935 Apr-2003 916.92 -0.51 7.15 8.00
01-Oct-01 1.998 Jan-2002 1130.2 -1.67 6.64 -4.71
01-Jan-00 2.152 Apr-2000 1452.43 -0.51 4.16 -1.49
01-Jan-99 2.147 Apr-1999 1335.18 -0.42 4.34 -0.48
01-Oct-98 2.156 Jan-1999 1279.64 -0.60 16.47 4.34
01-Apr-98 2.169 Jul-1998 1120.67 -0.69 0.80 -1.96
01-Jan-98 2.184 Apr-1998 1111.75 -0.64 13.41 0.80
01-Oct-97 2.198 Jan-1998 980.28 -0.45 7.18 13.41
01-Jan-96 2.155 Apr-1996 654.17 -0.05 2.85 -2.17
01-Jul-95 2.151 Oct-1995 581.5 -0.42 3.46 9.38
01-Apr-95 2.16 Jul-1995 562.06 -0.14 9.20 3.46
01-Jan-91 1.832 Apr-1991 375.34 -0.65 9.13 3.32
01-Oct-90 1.844 Jan-1991 343.93 -0.86 13.13 9.13
01-Jan-88 1.773 Apr-1988 261.33 -0.39 1.66 4.09
01-Jan-87 1.723 Apr-1987 288.36 -0.12 5.21 10.51
01-Oct-86 1.725 Jan-1987 274.08 -1.15 12.34 5.21
01-Jul-86 1.745 Oct-1986 243.98 -1.02 3.33 12.34
01-Apr-86 1.763 Jul-1986 236.12 -1.78 0.25 3.33
01-Jan-86 1.795 Apr-1986 235.52 -0.06 11.21 0.25
01-Oct-85 1.796 Jan-1986 211.78 -0.11 11.57 11.21
01-Apr-85 1.798 Jul-1985 190.92 -0.22 6.17 -0.58
01-Jan-85 1.802 Apr-1985 179.83 -0.83 0.11 6.17
01-Oct-84 1.817 Jan-1985 179.63 -0.71 8.15 0.11
01-Jan-83 1.748 Apr-1983 164.43 -3.21 13.17 -1.14
01-Oct-82 1.806 Jan-1983 145.3 -1.04 8.66 13.17
01-Jul-82 1.825 Oct-1982 133.72 -0.54 24.87 8.66
01-Jul-80 1.833 Oct-1980 127.47 -0.87 4.77 1.63
01-Apr-80 1.849 Jul-1980 121.67 -1.33 14.47 4.77
01-Jan-78 1.718 Apr-1978 96.83 0.00 8.49 3.98
01-Apr-76 1.735 Jul-1976 103.44 -1.20 1.77 -0.52
01-Jul-75 1.743 Oct-1975 89.04 -0.17 0.33 13.27
01-Apr-75 1.746 Jul-1975 88.75 -1.36 1.66 0.33
01-Jan-75 1.77 Apr-1975 87.3 -0.84 13.41 1.66
01-Jul-73 1.714 Oct-1973 108.29 -0.06 0.06 -10.82
01-Oct-72 1.677 Jan-1973 116.03 -0.36 3.99 -7.81
01-Jul-72 1.683 Oct-1972 111.58 -1.46 3.90 3.99
01-Oct-71 1.694 Jan-1972 103.94 -1.57 10.30 3.59
01-Oct-70 1.757 Jan-1971 95.88 -2.33 15.17 8.42
01-Jul-70 1.799 Oct-1970 83.25 -0.55 6.66 15.17
01-Jul-68 1.733 Oct-1968 103.41 -0.23 5.80 -0.39
01-Apr-67 1.712 Jul-1967 94.75 -1.78 0.79 -1.53
01-Jan-67 1.743 Apr-1967 94.01 -0.29 8.54 0.79
01-Oct-64 1.655 Jan-1965 87.56 -1.25 3.18 1.77
01-Jul-64 1.676 Oct-1964 84.86 -0.48 2.02 3.18
01-Apr-64 1.684 Jul-1964 83.18 -0.24 4.68 2.02
01-Oct-63 1.675 Jan-1964 77.04 -0.42 4.09 3.14
01-Jan-63 1.692 Apr-1963 69.8 -0.70 5.44 -0.96
01-Oct-62 1.704 Jan-1963 66.2 -1.39 17.13 5.44
01-Jan-61 1.726 Apr-1961 65.31 -0.80 5.71 2.22
01-Oct-60 1.74 Jan-1961 61.78 -2.36 15.71 5.71
01-Apr-60 1.802 Jul-1960 55.51 -0.93 2.10 -3.82

M2 Money Velocity data from http://research.stlouisfed.org/fred2/series/M2V

Bottom line , M2V decrease and SPX increase are indeed bullish for SPX going forward in the next three months.

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