Money Supply

Money supply has seen huge jump since early October with adjusted reserves rising at an annual rate of change of 16.1%! This has been a major contributor to the more than 600 points added on to the Dow Industrials. Another major factor has been the private equity cash sloshing around. Anecdotally we hear of many large funds needing to put cash to work. This likely puts a floor on the stock market over the next several months.

Nevertheless, the market is currently overbought and looking somewhat tired. As evidence of the deterioration, the Nasdaq has underperformed the S&P and NYSE indexes since Thanksgiving. In addition, many individual stocks have begun experiencing breakdowns (see SNDK, MOT, GOOG, GLW, BBY, INTU, NDAQ, etc.)

Strategy Update: As evidence of the narrower market, the Select Equity Strategy has seen quarter-to-date lead on the S&P 500 Index narrowed over the past several weeks.