We’ve noticed Money Base vs. Price action of SPY is highly correlated to future price action. US has entered a tightening cycle, and as of recent no communication from FED to expand the money base. In fact, the training wheels of QE where taken off EOY’14, which marked the FED jawboning comments to prop markets as valuations deteriorating.
Countless Hindenburg Omens are issued signaling an unfair high. On a multi decade basis point of control is 131. Price prints on a distribution attempting to revert, but the FED’s experiment of jawboning the market thought vocal communication levitates. We simply wait for a reversion, as a market clearing is needed to healthy future price action.
Price Action in QE of constant liquidity vs. Price Action in conditional liquidity of no-QE. The jawboning movements is a central bank experiment of vocal commands misleading the market. Valuation are tremendously skewed, along with FED credibility is rapidly deteriorating. A reversion is in the process some know it as a topping maneuver, we use the analogy of a paddle wheel.