U.S. Money Supply Has Done Something So Rare That It Hasn't Occurred Since The Great Depression -- And A Mammoth...

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As you may have noticed, the bulls are in firm control on Wall Street. The ageless Dow Jones Industrial Average ( ^DJI 0.17% ) , benchmark S⁘P 500 ( ^GSPC 0.54% ) , and innovation-fueled Nasdaq Composite ( ^IXIC 0.90% ) all recently notched fresh record-closing highs.

But it hasn't always been this way. In each of the first four years of this decade, the Dow Jones, S⁘P 500, and Nasdaq Composite traded off bear and bull markets in successive years.

Though all three indexes have risen over long periods, forecasting short-term directional moves is something that investors can't do with any guaranteed accuracy. Nevertheless, it doesn't stop investors from trying to guess what the immediate future holds for stocks.

Even though the short term offers no certainties, there are a select number of predictive tools and forecasting metrics that have strongly correlated with moves higher or lower in the stock market throughout history. One such measure, which appears to portend a bumpy ride to come for the U.S. economy and Wall Street, is U.S. money supply .

While there are a handful of U.S. money supply measures, the two most closely watched are M1 and M2.

M1 money supply takes into account all cash and coins in circulation, as well as demand deposits in a checking account. The best way to think of M1 is as money that can be accessed and spent at a moment's notice.

Comparatively, M2 money supply factors in everything found in M1 and adds in savings accounts, money market accounts, and certificates of deposit (CDs) below $100,000. It's still money you can spend with relative ease, but the capital in M2 requires a little more work to get in your hands. It's this figure that's the source of concern .

M2 has been rising with virtually no interruption for the better part of nine decades. This is what we'd expect to see from a growing economy that relies on more capital in circulation to facilitate transactions. But in those very rare instances throughout history where M2 money supply has notably declined, trouble has followed for the U.S. economy and stocks.