Did Market Liquidity Increase Enough Last Week?

By: Marty Chenard | Mon, Jun 21, 2010
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June 21st Update: Is there enough Liquidity in the market?

June 14th comments ... see the first chart: When there is a lot of money available for buying an item, supply goes down and prices go up.

The same happens in the stock market. When lots of money moves in, Liquidity levels move from Contraction to Expansion. When Liquidity hits an expansion level, competition for stocks will drive prices up and the overall market will propel upward.

Currently, the market is showing a short term bias for the upside, but there is one disturbingly missing ingredient so far.

What is it? Liquidity.

Liquidity levels remain in Contraction. Daily movements are showing oscillating moves, so volatility will remain high while this goes on.

What do we need next? We will need to see the Liquidity indicator move up and make a higher/high than the May 27th high (see the red arrow). It takes inflowing liquidity to sustain up moves because without it, up moves falter. See the next chart for what happened last week ...

Long-Term Liquidity Flows

June 21st comments: Well, last week did give us an increase in market Liquidity by making a higher high.

That was a positive ... but there is still a lot more work to be done on the Liquidity issue. While improving Liquidity levels can be seen, they still remain in Contraction territory which is a high risk condition. In a way, this is saying that Wall Street is not highly confident about the economy as we move forward.

Yes, confidence is improving, but it still remains low. Investors are not afraid to "vote with their money" when they are very confident. Right now, they are voting very cautiously.

(Today's Liquidity Indicator chart is presented as a courtesy to our free members and can be seen daily on our paid subscriber sites.)

Long-Term Liquidity Flows - Chart 2



Marty Chenard

Author: Marty Chenard

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

Marty Chenard is an Advanced Stock Market Technical Analyst that has developed his own proprietary analytical tools and stock market models. As a result, he was out of the market two weeks before the 1987 Crash in the most recent Bear Market he faxed his Members in March 2000 telling them all to SELL. He is an advanced technical analyst and not an investment advisor, nor a securities broker.

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