Printer Friendly

eMail Article

August 05, 2008

What's Happening Now? A Stock Market Liquidity Squeeze ...
by Marty Chenard

Today's charts show the inflows and outflows of liquidity into the stock market. When inflows are trending up and positive (in expansion), the competition for stocks becomes high and prices are bid up causing an upside rally.

The opposite happens when we see liquidity outflows and a trending down pattern. When this is happening with outflows in contraction territory, the balance shifts to a selling competition where investors try to get the best price before expectations of lower movement. This causes a condition that ends up in a market correction.

At the end of May, Liquidity inflows started to decelerate when the April/May liquidity up trend had its support line broken to the downside. Liquidity has been in contraction ever since.

What has happened to liquidity inflows and outflows during the past few weeks?

If you look at the circled area on the chart, you will find the action since Mid-July. In the circled area, you will see that the liquidity has remained in contraction territory with a rise ... followed by a higher/low ... followed by a lower high and then by a higher/low yesterday.

That action was setting up the possibility of a triangular pattern at the close yesterday. See the second chart for what was happening at the open this morning.

At 9:37 AM this morning, the Liquidity did bounce from the support confirming a triangular formation.

Triangular formations are a "squeezing formation" because the resistance line drops lower, and the support line rises higher. This squeeze is typically exhibited by higher intra-day volatility in the stock market until a break out of the squeeze occurs.

As an investor, that is what you are waiting for now. An upside breakout on this liquidity squeeze would feed an upside stock market movement as investors bid prices higher. A downside breakout on this liquidity squeeze would cause underbidding by investors as they try to sell holdings.

It is data like this that helps investors "understand what is making the market behave the way it does". Today chart is posted as a courtesy, and can be found every day on our paid subscriber sites.

*** Feel free to share this page with others by using the "Send this Page to a Friend" link below.

Do you have a friend or fellow investor that you think would appreciate receiving a link to this page of Today's Analysis"?

If so, simply click on the link below to quickly and easily forward an email link. It is completely private, so we won't even know if you send one.

Send This Page To a Friend

Marty Chenard
StockTiming.com
Asheville, NC 28805
Tel: 828-296-1200

StockTiming.com is dedicated to Stock Market Investors who want the best information on stock charts, stock market trends, stock market timing and technical analysis.

Be My Guest and Take Advantage of Our Free Membership ... Get a Free Membership to StockTiming.com ... Youll receive important daily messages before the market opens and direct links to todays important web pages. Information and messages that are often not posted on our website. There is no obligation or expectation on our part ... it is just our way of proving our accuracy and timing expertise to you. Please click here for your Free Membership.

Copyright © 2006-2008 Marty Chenard

Image rendition and html coding Copyright © 2000-2008 SafeHaven.com

« BullionVault.com -- Buy gold online - quickly, safely and at low prices »
« Honest Money: A History of U.S. Gold & Silver Currency -- by Douglas V. Gnazzo »

« Opinions expressed at SafeHaven are those of the individual authors and do not necessarily represent the opinion of SafeHaven or its management. Articles are available via RSS/XML. Please visit RSSHelp for instructions. »