Liquidity Rally Continues with Market...
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Jonathan Yates
Liquidity Rally Continues with Markets Up, But More Stocks Trading Under Key Indicator

Even though all three exchanges finished trading today higher, more than 55% of stocks are trading below the 50-day simple moving average.  That is a negative indicator, particularly for a liquidity driven rally.  The earnings season has been tepid and economic growth is still off, both in the United States and China.  No investor should expect any economic growth from Japan or Europe anytime soon.

As a point of reference here, Japan is in the 23rd year of its “Lost Decade.”

The best economic indicator has been another liquidity driven one: housing.  Prices and starts are both up.  Both, for housing starts, a huge amount, almost 40%, it for multi-family units.  That signals that builders expect there to be more renters than before.  This is very bearish, as the housing market needs buyers to continue surging.

The chart below shows the dips being taken by the exchange traded funds for the Dow Jones Industrial Average (DIA), NASDAQ (QQQ), and Standard & Poor’s 500 Index.  Gold finished the trading weak up the last two days.  That is a bearish indicator if the Yellow Metal is picking up buyers in its traditional role as safe haven asset when economic times are tough.

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