Courtesy of Lee Adler of the Wall Street Examiner
The composite liquidity indicator downticked slightly last week on small declines in most of its components. It has been flat since May 2, while remaining in a strong uptrend. We know that the Fed’s pumping to Primary Dealers is in a virtually permanent uptrend, but other indicators may not be. Pauses have been a normal feature of this uptrend. Downturns have been rare and short-lived since 2008.
While the uptrend may slow from time to time, unless the trend turns down for a significant period, a broad based bear market encompassing both bonds and stocks is unlikely. However, when the trend of liquidity is flat, one of the markets is likely to be downtrending while the other stays in an uptrend or at least flat. It’s also possible that both markets could become rangebound.
Sorting out those issues is where technical analysis comes in.
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