Following up on yesterday’s post, “It’s Complicated”, today we are showing our “Diffusion Index”. This measure is one I watch to gauge where we are in the Bubble Pop.
It is quite simple. The index was set to “0” for the date of February 24th, 2021, the date when the Bubble started building as core economic factors started creating negative effects. The stimulus crowd, using excess FED and Fiscal dollars, then started searching for something to push higher regardless of valuation.
So to SIMPLIFY…
We created an index, equal weighted on each side.
On one side of the equation, we have stocks and Bonds, SPX, NDX, TLR, and IEF.
On the other side we have the Dollar and Gold, the only two things other than possibly commodities, that have a chance of going higher when the bubble collapses.
Here is that chart.
And now TODAY, October 26th, 2021, we see the September 24th gap filled at 10:40 AM CDT.
Other important dates on the chart are:
February 24, 2021, Bubble starts building.
September 23, 2021, Trade ignition day on the equation.
September 24th, 2021, Breakaway day.
September 30, 2021, 50 day average for the equation turns down.
October 4th, 2021, 21 day average breaks below 50 day average.