The Adjusted Monetary Base and the S&P 500

The following chart depicts the relationship between the "Adjusted Monetary Base"and the S&P 500.  A quick perusal of the chart indicates that the relationship between the Base and S&P 500 has been very close, especially since 2009.  Ok, what is the Adjusted Monetary Base?  First, it is the one monetary component that is completely under the control of the Federal Reserve System.  (That in itself should speak volumes.) Second, it includes the total amount of currency that is either in the hands of the public or in the commercial bank deposits held at the Federal Reserve, which is known as member bank reserves.  Of the two components, member bank reserves are the largest.  


Since early 2010, the "Base" has been trending downward.  Likewise, the S&P 500 topped out approximately one month after the "Base" topped out.  This has been one reason why I have been negative on the S&P 500.  I would recommend that you not only keep a close eye on the "Base Money" but include it as one of your investment tools.