Liquidity Analysis

United Technology is buying Goodrich for $16.5 billion in cash. In addition, the $6 billion cash National Semiconductor deal closes tomorrow. The combination of these two deals will act as a $12.5 billion inflow into the market. According to Trim Tabs liquidity theory 2/3 of a deals value acts as an inflow into the market at the announcement of a deal and 1/3 of a deals value acts as an inflow upon closing.

The market is down this morning on a soft China PMI. There do not seem to be any new landmines out of Europe. In order to take advantage of the liquidity, I have removed a portion of my partial hedge in the pre-market. This increases my net long position.

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