The market continues to sit at a critical inflection point, at minor support on the edge of an air pocket. Some indicators hint at an upturn, but it’s by no means certain. If the SPX falls into the air pocket, it could decline sharply in the short run. That would be enough to trigger major cycle sell signals. I would consider it surprising in view of the liquidity picture, especially with the larger Fed purchases of QE3 starting to settle this month. But if the technical indicators roll over as the market breaks support, such signals would rule, regardless of the liquidity backdrop, because it is always possible for the markets to destroy liquidity faster than the central banks and their cronies might otherwise create it.
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