S&P 500 Index versus M2 Money Velocity
h/t @Vconomics
Here’s a cool chart: the S&P versus M2 Money Velocity. Spot the divergence. pic.twitter.com/v6zLFgkPwg
— Vconomics (@Vconomics) February 27, 2014
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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