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A Not So Random Walk in 2013 October 24, 2013

By Knowledge Leaders Team in Uncategorized

Everyone that’s read Burton Malkiel’s A Random Walk Down Wall Street learns the idea that the movement of stocks is random–they can rise or fall on any given day.  Like a hitter in baseball or a shooter in basketball, players can go on ”runs” that temporarily give the appearance of non-randomness.

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China’s flash manufacturing PMI came in at 50.9 in October vs the official reading of 50.2 in September. Readings above 50 signal expansion. The rise was mostly driven by the backlog of work and employment components (though the employment component remains below 50), but new export orders registered a small gain as well.

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Rally Like It’s 2009 October 24, 2013

By Knowledge Leaders Team in Uncategorized

We perform a variety of calculations to understand the often imperceptible changes in the underlying structure of the stock market.  One calculation we make is to measure the percent of stocks making a new 200-day high.  Historically this metric gets the most extended during the first move off a major low–like in September 2009.

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Employment in the US & Stock Valuations October 23, 2013

By Knowledge Leaders Team in Uncategorized

For the last 40 years, the employment to population ratio has been well correlated with equity valuations.As would make sense, when more people are working, income is higher, demand is more sustainable and investors rationally capitalize corporate earnings at a higher rates.  When employment rates are low, the opposite happens.

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NYSE Margin Debt rose to All-Time highs October 23, 2013

By Knowledge Leaders Team in Uncategorized

Peaks in NYSE Margin Debt has been a leading indicator in the last large market declines (2000, 2007, 2011). NYSE Margin Debt was looking like it might be topping out in April. However, the latest data for September shows it increased by about $20 billion to new all-time highs.

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