New highs for S/P 500 and Dow Jones 2010?

I don't think so, as discussed in Dow and S&P 500 are all topping out, relative to risk barometer currency AUD (updated) all major indices have now topped. The market has rallied on risk, namely from somewhat positive q2 earnings.

The rallies looked stretched on thin to medium volume accumulation. But if you look at the S&P 500 (10yr) and use the chart as example we can see how much liquidity can change markets and how the yield can also be sen as a indicator of stock trends; on the 5th October 2007 when the yield was at 3.78% the S&P 500 closed at 1,557.50 that was it's 10 yr peak, then as we all know the Fed cut rates and drove the yield down into 0% territory, on December the 2nd 2008 the yield was sitting below 0.01%, this yield remained when the index topped 1,205.90 (21st April 2010) it still remains at 0.01% with the current (26th July 2010) S&P 500 close at 1115.00. But, the S&P500 is still at 5yr lows compared to the 28th June 2005 close at 1201.50 when the yield was at 2.20%.

ref: Dynamic Yield Curve relative to S&P 500

The 10yr Dow chart (below) is self explanatory no new highs in the last 10yrs (apart from the 2008 price spike - before the bust) liquidity inflows or not:


The point? The deflationary argument may reiterate a strong tune in favour of deflationary forces on stocks prices, when liquidity still hasn't managed to propel stocks into 10 yr +highs. Also indicates that liquidity may not entirely move into the stocks, rather liquidity ended up supporting the broken balance sheets of the WHOLE global banking system.