#63 S2N: Lots of Money Here?

S2N Spotlight

Marcus Aurelius is telling us that we shouldn’t overthink things when they are blatantly obvious. According to stoic philosophy, asking questions like why can be a waste of time. He feels you should rather focus on what you are going to do about it.

The chart above shows the money supply as defined by M2 money divided by nominal GDP. It is a good way of measuring how much liquidity is being pumped into the system. Naturally, when the pot of money grows at a similar pace to GDP, there are going to be obvious consequences. We don’t ask why; we simply anticipate what. Well, we are currently experiencing some of those consequences with higher inflation and gold making new all-time highs. If I look at this chart unemotionally, I can see the ratio making its way lower as the system self-corrects. The ratio reached 100% and is now sitting at 92%.

Side note: I am building all the things I find interesting and making them available on the website for free. It would be far easier and a lot quicker to simply copy and paste others work, but that would make me and you dependent on the person sharing that information. I am a bit behind in placing all the work I have done on the site, but it will soon all be updated daily for you and available whenever you want to look at it.

S2N Observations

On Thursday last week, the Nasdaq TRIN index registered a 0.16 reading, which was only the 6th time it has reached that level in 30 years.

A Trin less than 1 indicates bullish sentiment. A value less than 1 suggests that the market is strong, with more volume flowing into advancing stocks compared to declining stocks. With this line of thinking, you would believe a 0.16 is very bullish.

You can see on the chart below the buy markers when the Nasdaq TRIN is below 0.2 I am not so bullish on this signal, as I see it as more of the euphoria that comes at the end of a long bull market where headlines of new all-time tops are almost weekly occurrences.

It is clear that the market is feeling very complacent, with the VIX dropping below 12. The market is very well positioned to hit an air pocket over the next few days or a couple of weeks.

It has certainly been a big year for commodities. Here are a few star performers.

This is by no means a holy grail but the trading rules that I coded here are remarkably good at picking bottoms in copper which is currently making new all-time highs.

In January of this year, a friend of mine asked me what he should do with his Solana crypto holding. I said 2023 was a huge year for Solana, and I don’t like it for geekish reasons. I am a fan boy of Cardano so I said switch. It was certainly not one of my better calls.

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