GlossaryM2 Overlay (US M2, 90-day lead)
M2 Overlay (US M2, 90-day lead)
The US M2 money supply as a line over the price, shifted forward by 90 days. The thesis behind it: liquidity leads the price by about a quarter. With the offset, the two paths line up whenever the thesis currently holds.
What is drawn
Each candle shows the US money supply in billions of USD as it stood Lead days earlier: the latest monthly value that applied at that earlier time. The lead counts real calendar days. The shift therefore depends neither on the chart interval nor on weekends: 90 days are 90 days on every chart.
The line is fitted into the visible price range: its lowest visible value sits at the bottom edge, its highest at the top edge of the middle 80% of the price pane, linear in between. At the crosshair, the legend shows the value in billions of USD at that candle, that is, the level that applied that many days earlier.
How to read it
- Same path: If the price follows the shifted line, the liquidity thesis holds in the visible period. Turning points in the money supply then point to turning points in the price a quarter later.
- Divergence: If the price rises while the shifted money supply falls, the rally lacks a liquidity tailwind.
- No fixed law of nature: The lead varies from cycle to cycle. Try other values and check which offset makes the paths line up best.
Good to know
- Only the US money supply is drawn, not a global money supply from several currency areas.
- After the shift, the most recent months of the money supply would lie to the right of the last candle. This part is not drawn.
- M2 is a monthly value and comes out a few weeks late. On daily candles, the line runs as a staircase.
- Unlike the Custom Symbol Overlay, the line is not logarithmic, and the offset counts calendar days rather than candles.
- Intended for 1D to 1W.