13 November 2009

A bit of confusion in the markets

You may know that the purpose of this blog is not to accurately predict the short-term direction of the market and its components. That's a bonus.

Our primary objective here is to show that a disciplined analysis of market movements and behavior using quantitative factors, powerful database delivery tools and visual analysis presentation is a cost-effective way to build an informed and actionable opinion about the equity markets. As you may have gathered it is extremely difficult to pick the market's direction. There simply too many factors driving the markets day to day meanderings, usually. Likewise it is impossible for the average investor to outperform the averages by stock picking. Gaining an edge requires intelligence, information and the ability to act upon it. As we know from last year's market debacle the smartest guys at Bear and Lehman weren't smart enough. As we know from Galleon, information doesn't come cheap. Even smart guys with the inside scoop have a hard time coming up with a new trading idea every day (or week).

Better to try to surf the larger systematic trends in the market as discussed a few days ago. We get most of our numbers from Mergent Ford www.fordequity.com and we refresh our models once a month. So today is the day for the new numbers from end of October. The Ford models are recalculated daily with all new data. Some times changes are slight, sometimes sweeping. In any case they reflect recent changes in price momentum and earnings trend. It will take a day or two to understand what's changed in the last month. We have more to say later today.

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