The signatures of excited-state correlations in the third-order optical response of many-electron systems are calculated using a time-dependent quasiparticle picture which maps the optical excitations onto a system of interacting bosons, following a transformation to boson (oscillator) variables. The many-body wavefunction is approximated by a Gaussian wavepacket representing a squeezed state in the quasiparticle space. Unlike the standard coupled-cluster technique, the present approach constitutes a generalized coherent state representation which makes it possible to derive simple closed equations of motion for its parameters. The time-dependent Hartree-Fock approximation is recovered for weakly correlated systems where squeezing is negligible.