When Market Liquidity Is Bullish But Investor Preferences Maybe Are Not, Honor The Technical Signals – Professional Edition

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The composite liquidity indicator dipped last week mostly due to transitory factors that should reverse in the weeks ahead. The uptrend in market liquidity is still firmly in place. The uptrend in liquidity is sufficiently strong to support bull markets in both stocks and bonds, not to mention money substitute commodities. However, investors may favor one market over another at any given time. When there is selling in one market, cash is freed up to flow toward other markets. When there’s excess liquidity, if stocks are being sold, that makes it just that much more likely that bonds will rally, and vice versa. Lately investors have returned to a preference for Treasuries while liquidating stocks and targeting their cash for Treasury bond purchases, pushing yields lower.

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Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also provide analysis and charts for David Stockman's Contra Corner which I developed for Mr. Stockman. I’ve had a wide variety of finance related jobs in the past 44 years, including a stint on Wall Street in both analytical and sales capacities. Prior to starting the Wall Street Examiner I worked as a commercial real estate appraiser in Florida for 15 years. I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. My perspective is not of the Ivory Tower. It is from having my boots on the ground and in the trenches of the industries that I analyze and write about today.