From Landau-Alexander-McTague theory and Monte Carlo simulation results we show that the modulated liquid obtained by subjecting a colloidal system to a periodic laser modulation has long range bond-orientational order and non-zero shear rigidity. From infinite field simulation results we show that in the modulated liquid phase, the translational order parameter correlation function decays to zero exponentially while the correlation function for the bond-orientational order saturates to a finite value at large distances. (C) 1999 Elsevier Science B.V, All rights reserved.