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We recently examined how money supply trends influence the stock market. Herein, we apply a "similar but different" approach to using money supply trends to generate a favorable or unfavorable outlook for gold bullion.

The Risk On/Off Indicator ended a long risk-on stretch after deteriorating quickly. Similar signals showed no immediate weakness, but returns softened about a month later; avoiding that interval improved in-sample results without materially reducing drawdowns.

There are reasonable concerns about stocks as September unfolds. However, long-term investors with at least a six- to twelve-month time frame may take heart in recent indicator signals related to high beta versus high quality, option open interest, and IPO activity. Details herein.

The Market Environment Composite has dropped to 2, entering a historical "Danger Zone". Readings between 2 and 4 consistently generate annualized losses of -6% to -10%, warning investors to reduce risk until favorable conditions return.

Despite short-term macro fears and rising credit stress, quantitative signals remain structurally bullish. A rare AAII Bull Ratio signal and Real M2 money supply trends historically point to massive 12-month equity gains with a 100% win rate.

In Part 1 and Part II, we highlighted indicators based on analyzing the money supply using the M2 data series. Here in Part III, we combine those two indicators into a simple model for deeming the outlook for stocks as favorable or unfavorable.

In Part I, we looked at how short-term changes in the money supply can affect stocks. In Part II, we look at performance based on the trend in the relationship between stocks and the money supply.

Short-term breadth in the Nasdaq 100 has weakened while a majority of members remain above their 200-day averages. Similar setups offered little immediate direction, but healthier long-term breadth historically coincided with a smaller six-to-twelve-month downside tail.

One accurate assertion states that "money moves the markets." This series of notes will examine how changes in the money supply influence financial markets, including stocks, gold, and Bitcoin. Part I focuses on how monthly changes in the money supply can influence stock prices.