via StockCharts.com
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The computers algorithms could really hypothetically trade us down to 0.
Without new money coming to market essentially they same money is getting recycled in the market over and over again. Now this "recycled money" drove the dow to 11,200 april highs. Problem is that the "recycled money" buying capacity diminished as stock prices rose on greater volatility and less and less volume. Which inherently makes your support levels weaker due to the fact that as the market went higher, positions in securities on a volume or number of shares of owned actually got smaller. Therefore there is less to "defend" at support levels.
We are clearly seeing this erosion take place in the market. As evidenced by the Chaikin Money Flow indicator on a current a one year chart.
Until new money is put to work in the market, this erosion will surely continue in the market.
What we can infer from this, is that, essentially with current levels of liquidity, there is only enough money at play to take the market from 6500 to 11,200. And that another possible major move down in the market is looming.
People will also begin to take money out of the market, out of 401ks , and mutual funds. This will also exacerbate the move down too.
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