This morning, I have a few random thoughts to share. Do with them what you may:
• The end-of-quarter mark up period seems to begin a little earlier and end a little earlier each Q. The past few days reversals and today’s weak futures imply that window dressing ends around T-3.
• Speaking of Futures: Lately, it looks like the Equity Futures predict little more than the Open. Are they that easily pushed around? Do they contain less and less information? I would love to see a correlation study looking at their ability to forecast that day’s close.
• What is the true percentage of volume that High Frequency Trading makes up fort he major indices? The 70% number was an out of context statement that was repeated mindlessly. Is it actually more or less than half? Quarter?
• Measures of Overbought and Oversold have very different contexts depending upon your time line. We can simultaneously be overbought since the 2009 lows, oversold since the April peak began, and overbought on a 10 day basis.
• Do not ignore Über Bears like Albert Edwards who base their analysis on historic valuation metrics. Except for very brief periods — think October 2002 and March 2009 — US equity markets have been mostly overvalued for at least 15 years, possibly longer.
• Blame Greenspan’s EZ money for above (Bernanke continued the tradition).
• You must understand the difference between secular and cyclical factors. This certainly applies to markets, but it also applies to things such as Employment data, Housing, etc. Always distinguish between the long terms trends and the shorter duration cyclical factors. (In many areas we have problems with both time frames).
• My single biggest concern regarding equity markets is not a bear or a bull phase — its the wholesale abandonment of investing by the broader public. That is the reason it too 25 years to regain the 1929 peak — til 1954. It required an entire new generation to be born, grow up and start again. I figure we are about 40% of the way there now.