I would REALLY appreciate if someone would care to calm me down. Please have a look and tell me we are not doomed
I thought this chart deserves explanation. My take is that this is the last nail in the coffin of this rally. Also this explains big swings and gaps we had lately... Anything else someone might wish to add?
I can explain it only to the certain extend (otherwise I wouldn't ask for more interpretations) When liquidity drops like this (never happened for the last 3 years BTW) you've got huge swings of price in either direction and it take more time for any order to be filled. It means that trading becomes much more dangerous. In fact we saw a small preview of this last week with big gaps up and down almost every day. Although I tend to interpret this as a last nail in the coffin of this rally - I can be wrong. Anyways it's better to be alert and not to trade too much this week (overtrading is a bad thing anyway, but this only reinforces this truth)
VIX show a signal of "Buyers" euphoria. Combine the VIX with the Liquidity chart and we look to the end of the rally. Of course...the FED and GOV are at the tail end of the HOPE ROPE and I could only imagine that we test the lows, if not break them in the next few months. Flight to Quality and Safty would be wise. I still believe we are no where near the worse point in this storm. The final blow of a hurrican comes after the EYE, not before...and that final blow is far more destructive than the first.
Can anyone explain? To OP, it seems you don't know this chart either and you already decided to dove off the window? Why are you so scared?
Market liquidity is dropping. Is this mean that stocks with high short ratios will shoot through the roof?
Seems to be in agreement with the premise of this article. http://zerohedge.blogspot.com/2009/04/incredibly-shrinking-market-liquidity.html