Wednesday, February 1st. - Stock Trends, Charts, and Commentary (***If you see last week's Wednesday Update: Click Here)
The reason why technical indicators confuse some analyst ...
Investors and analyst have their favorite indicators like oscillators, Relative Strength, MACD's etc.
But sometimes, they give off overbought or negative divergence signals and the market just doesn't react. This confuses investors as they never really know why.
However, there is a good reason and it has to do with a simple observation that Jesse Livermore made. What was it? That the market is all about money, and watching money flows was what it was about.
Watching money? It turns out that if you watch the levels and trending of Inflowing Liquidity, it will give you an advantage in the market. High levels of Inflowing Liquidity will override overbought and negatively divergent conditions. It is why some say that overbought conditions can stay overbought for a long time without realizing why.
This is one of the reasons why we post the daily Liquidity Inflow action for our subscribers. The chart below show's the Inflowing Liquidity action and levels since last June.
First, note the red and blue labels indicating levels that show Liquidity is in Expansion or Contraction on the chart.
Next, look at where the Dec. 23 and Jan. 10 labels are ... both are significant.
On Dec. 23, the Inflowing Liquidity went into Expansion territory, AND it had a tick that closed above its resistance line.
It then continued up higher and tested its July/January resistance line. As you can see on the chart, it closed above its upper resistance ling on January 10th.
After that, it skyrocketed up from Quadrant 2 to high in Quadrant 1. It is a little hard to see, but yesterday (Tuesday) the Inflowing Liquidity level had a small up tick. Liquidity levels were enough to offset all the selling yesterday and still deliver a small net increase in money flow. That would have made Jesse Livermore happy.
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