I track liquidity, but it has nothing to do with economic fundamentals. I track newly created liquidity as it is flowing into markets, which is the primary action of liquidity. Liquidity is created. It flows into and between markets, and when on those rare occasions it is destroyed, it disappears via the market. These flows are directly and fairly immediately reflected in changes in market pricing.
Economic activity is a second derivative of liquidity. The first impact is market action, because liquidity, by the very nature of the mechanism, must flow through markets before it reaches the level of “fundamental” economic activity. Liquidity analysis cannot predict or measure which specific industries or companies will benefit. We have to follow the charts for that.
If you want to say that liquidity analysis is “fundamental” in nature, that’s fine, but when it comes to those things that most people consider “fundamentals” like measurements of national and corporate balance sheet and income statement trends, my position would be that it’s an utter waste of time from the perspective of short term or intermediate swing trading. The only way to trade successfully is by tape reading and technical analysis. I’d go even a step further. The only aspect of technical analysis that you need is price pattern analysis, a broad term which includes cyclical analysis. Volume analysis just wastes time and confuses the issue.
Analyzing company fundamentals is an absolute waste of time from my perspective. In the end, to have any hope of consistent long term success as a trader, all decisions must be essentially based on price action. It is the sine qua non, both necessary, and in itself sufficient, for successful trading.
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