The frogs are chirping outside the local brook again en masse as of March 25. but they stop all noise whenever the local hawk flies by. One wonders if there is a comparable quietude in prey when predatory markets fly above. I often note such a quietude in prey markets while bonds make their move. It is good to quantify such speculations and to generalize them to other examples of foraging and deceptive behavior in markets and life.

The market mistress gave us something never before seen on Friday — a range of just 12 points from high to low, 821 to 809. Such hadn't been seen on a non-holiday since the very slow summer days before the storm of August '08. The day following on the most similar occasions, taking account of the down open, were bullish — but, not taking account of the open, were bearish. What cataclysmic event does the market wish to lull us into a false sense of security for with these unusual moves?

George Parkanyi responds:

Well, it is a bear market until after much hindsight some point down the road we determine that we are finally again in a bull market. Therefore, it is not unreasonable to assume for now that we are in a bear market rally. Although I think it's rather beguiling to think that the devil's number of S&P 666 was the ultimate low from which the market recoiled back on March 6. Did someone hold a cross up to the big board at the right moment? Or is that number the vortex back into which we will be drawn, kicking and screaming, much as a black hole sucks up all that unwittingly ventures into its grasp? This has been a very news-driven market, mainly feeding on the fear of systemic failure. I think this fear, and therefore the overall negative market psychology, have abated somewhat. The news of late is more along the lines of what is being done about the sky falling (and the bickering associated with it) than the sky falling itself. And spring I think tends to cheer people up a little. However, Q1 earnings are right around the corner, and much like a patient who has recovered a bit but whose immune system is down, market psychology is still very weakened and vulnerable to any blind-siding news that either validates or reminds that yes, the sky is still falling.

So I wonder, in Homeland Security parlance, would this be market orange-alert territory?

Victor Niederhoffer adds:

To test the Frog-Hawk Syndrome, I looked at all occasions when bonds changed by more than a full big handle, e.g. from 110 to 111, in the last 10 years while S&P futures changed in absolute value by less than 1/4%. I found that such occurrences are rare. While the bonds as of 12 noon change more than one point in absolute value about one in 10 days, 200 times during the period, the corresponding change in the S&P was less than 0.25% just 1/10 of those times. I found that the subsequent changes in the S&P on those occasions was random. Turning the situation around with the hawks being stocks with the bonds being the frogs, I found that the situation was more interesting, with a flight of stock market hawks with quiet bond frogs, inordinately leading to great subsequent continued energy by the hawks.





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