Cat’s Away, Mice Play

The cat metaphor, in this case, is information, liquidity, and conviction. We are in another quarterly reporting phase when most companies, because of quiet period rules, are restricted from making substantive comments until they report their latest results. They also must suspend stock buy-back programs to not take advantage of any material information that might be coming from their earnings announcements. In addition, many investors are confused and unsure about our economic future.

In this environment, algorithmic, high frequency, and tactical trading have more than the usual impact upon market action. It is why we often see increased volatility during these periods. In many cases, this price action tells us little about the prospects for specific companies. Up one day and down the next is symptomatic of the cat’s absence, in this case.

Over the next few weeks, investors will see the results from a multitude of companies. This information should help them better understand the business environment and what to expect soon. Some fears can be allayed, and more conviction established. Increasing liquidity will provide more orderly trading and dampen volatility. The Bull and his partners believe that the economic environment is better than many fear; we shall see. Stay steady, my friends.

The Lonely Bull