The composite liquidity indicator surged to another new high last week. That was not enough to stop a sharp selloff in stocks. But when the Fed’s monthly MBS purchase settlements began on April 10, that stopped the bleeding. While there have been a number of ominous technical signals in the charts of stock prices and cycle indicators, strictly on the basis of the liquidity trend, I am forced to conclude that this was just another instance of the dealers shaking out some inventory before marking them up and distributing them again.
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