QQQ/M2SL Where does the economy stand important areas to watch

Hello Traders,

This is somewhat an educational post as well as some TA with possible directions to watch for.

update on #QQQ (#Nasdaq 100 ETF) vs #M2SL seasonally adjusted money flow in billions.

When indexing this chart to a scale of 100 we may have a clearer picture of what is going to play out, important areas to watch for that may present opportunity and where the blood may shed. At the time of posting the last update, the index was around 111.11 and since raised all the way up to 133.62 hitting the monthly 20 EMA and coming right back down to a very important #support line dating all the way back to the .com bubble in 99’, as well as bringing action closer to the 13 year Support trend line (white ascending trend line) starting back at the bottom of the market in 09’. Which this recent pullback Nov 2021’ to present (35.28%) has been the largest correction experienced since that crash in 2007-2009 crash (58.03%) due to the #PrimeRateDebauchery ushered in via the #HousingMarketCollapse. If you look back to the #dotComBubble collapse starting in 99’ and the twin towers attacks which came shortly after you’ll see these pullbacks were nothing in comparison to the pullback (86.43%).

Now that we have had a small history lesson about the chart its time to dive into this a bit deeper knowing some of the numbers and seeing the charts.

To give a better understanding of how #M2 #money #supply seasonally adjusted works here is the definition from the #Fed #FRED data.

“Billions of Dollars Seasonally Adjusted, M2 includes a broader set of financial assets held principally by households. M2 consists of M1 plus: (1) savings deposits (which include money market deposit accounts, or MMDAs); (2) small-denomination time deposits (time deposits in amounts of less than $100,000); and (3) balances in retail money #market #mutual funds (MMMFs). Seasonally adjusted M2 is computed by summing savings deposits, small-denomination time deposits, and retail MMMFs, each seasonally adjusted separately, and adding this result to seasonally adjusted M1.”

To understand M2 you must understand M1 so, here is the definition from the Fed FRED data.

"Before May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other checkable deposits (OCDs), consisting of negotiable order of withdrawal, or NOW, and automatic transfer service, or ATS, accounts at depository institutions, share draft accounts at credit unions, and demand deposits at thrift institutions.
Beginning May 2020, M1 consists of (1) currency outside the U.S. #Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. #government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve #float; and (3) other liquid deposits, consisting of #OCDs and savings deposits (including money market deposit accounts). Seasonally adjusted M1 is constructed by summing currency, demand deposits, and OCDs (before May 2020) or other #liquid deposits (beginning May 2020), each seasonally adjusted separately.
For more information on the H.6 release changes and the #regulatory #amendment that led to the creation of the other liquid deposits component and its inclusion in the M1 monetary aggregate, see the H.6 announcements and #Technical Q&As posted on December 17, 2020."

So understanding the money that flows in the US in comparison to the QQQ (the Index that includes the 100 largest non-financial companies listed on the Nasdaq based on market cap.) We go into a deep dive comparing the charts with prior data and technical analysis along with what we see in the economy now bringing us to a point of understanding when this market may turn around or get much worse.

As you see on the chart we have 3 main points of support, one in which we are currently at right now with the 13 year trend support slightly under where the action is at present on the chart. It is important to note, with more money potentially being printed via inflation stimulus packages in the near future this could likely prop this chart up a bit. The areas we want to watch for a bounce is where we are currently at and slightly below where the white trend line is holding. Personally I do not this this looks like a top to a market with a large impending crash as most think will be coming but, it is important we keep a level head and a neutral bias until we have confirmed data telling is the direction we are heading. Simply put, we must hold this trend line to continue this growth structure of the last 13 years. A good indication that is coming is chart action breaking above the yellow down trend line on the chart bullishly. Any break below the large ascending trend could mean for a few years of sideways markets and lower lows in the near future, which we will most likely see a slight bit of regardless in the next few weeks.

I will come back and update this chart in a month or two... of when it becomes relative soon. Keep an eye on these major trends and supports in the mean time and most of all have a GREEN week!

Savvy