From what I have read, all econometric points of view regarding business cycles and prices come down to diminished returns. This is consistent with the herd mentality in that if they are unable to continue pushing prices higher for lack of bidding, they simply stop and look elsewhere. Bids disappear on the belief of overvaluation, and the asymmetry of price movements means short side is where the immediate returns are.
Hence the popularity of Schumpeters "creative destruction" in relation to real bricks and mortar assets, as well as asset prices (the cycles). When trends go linear on high asset valuations, this is mathematically diminishing rate of return. Hence parabolic price movement equate to constant %rate of return by way of comparison.
The bottom line is that risk management of real money will position market moving, market impact capital where the 'perception' of highest comparative return is. This is the law of maximum and minimum utility (return). If there is more downside risk than upside, then real money makes trends change on balance of flows in or out.
This asset "rotation" is approximately from equities to commodities to treasuries to cash. Buying low offers maximum returns - and despite all the b/s rhetoric, this is indiscriminate as it is *all* about the dollar. See also all the rhetoric on the "great rotation" that was supposed to happen.
Personally I have found more often that timing to be more relevant than absolute price levels.
AUS200 1hr from last week - the range tagged worked out consistent with an inv H&S which is actually a cupping top
AUS200 UPDATE 1hr -
AUS200 UPDATE 4hr - the cup failure is the solid blue line; and the daily suggests trend failure below 5390 has an open downside.
EmMkts - China SSEC (composite) has weakened recently to fill the gap on return from Feb national holidays. A large cyclic low can be made from Feb2014 if 1960 holds. Otherwise downside for 2015 is likely to continue.
Foreign Direct Investments and Free Trade agreements play havoc with currency valuations. Just as occurred in 1900 with the GBP, so too with the appreciation of the Chinese RMB occur against the USD. Currently 6:1 it is very likely going to be 3:1 in 2030's some time.
This alone would have the US in a bother. Hence the recapitalisation of ALL US commercial banks and corporations. TBTF is by design, the weather the storm and position for this century. The US/Japan TPP is kind of making formal what is already occurring.
Updating the taper that is yet to taper - FedRes balance sheet vs DJIA
The US is still running the worlds largest deficit in nominal terms - albeit reduced from record levels. Hence the primary money markets remain dependent on the nextwork of primary dealers to control the flow of debt created by the US Treasury. Japan is consuming their current account due to the failure of Abenomics to do anything meaningful, except produce a weakened JPY.
That US Treasury yields remain anchored to the zero bound is not a sign of any normality. Everyone buying US Treasuries would know this explicitly IMO. This reduces the scope of available markets with which to move real capital into and out of.
(20min delay)