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Waterfall of Liquidity


We are set for a big opening in the market today – the world’s central banks announced a huge liquidity injection to stave off the problems in the European banking system.

This was combined with China lowering its reserve requirements and the ADP Payroll Report here in the states showing 206,000 new jobs in November.

It seems to be a perfect storm of good news and as you can see on the graphic above (I know its small, but its the only futures graph I could locate on short notice), the futures are up big on the announcements – all of which seem suspiciously coordinated to make the November fiscal year end of mutual funds and hedge funds look better – but that is just being paranoid, I suppose.

The S&P Futures are showing 1225 at the moment, which is busting through both resistance levels I mentioned in the post the other day (both 1205 and 1220), We will see what happens when the markets actually open and the news gets digested during the day, but indications are that we will see another positive day, potentially very positive.

In reality, if you look at it, this is really an admission by the governments around the world that things are really bad and significant action needed to be taken to head it off. That realization may weigh on the market during the day or it may just be buying euphoria by hedge funds that are short the market and need to cover those positions.

All in all, should prove to be an interesting day.

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