Free Trading Signals From Global Markets

One way to generate free trading signals is by watching global markets and how they react to events as they unfold in the financial marketplace. This enables the investor to get a more diverse perspective on what information and news items are moving asset prices. This broader perspective can come in handy when it comes to trying to invest in domestic stocks and other risky assets because the global market can act as a barometer for how domestic assets will react.

Do Global Markets Lead or Lag?
There was a time I think when it would have been fair to say that, “as goes the US, so goes the world,” when it came to stock prices. Today many would argue that macroeconomic forces play a greater role in determining stock returns – and I happen to fall into that latter camp. More and more we see money move rapidly in and out of countries and their stock markets on a moment to moment basis. Given the world’s wealth continues to be concentrated into an every smaller number of hands – and those hands have become more and more indifferent to where their money is parked – macro movements appear to have gained the upper hand. We can see this in the predominance of drastically shortened asset holding times (investment duration if you will).

Shorter Investment Durations a Clue for Trading Signals
It has been noted elsewhere that investment durations have fallen from a period of about eight years (US equities on NYSE) down to a little less than 4 months today. HFT (high frequency trading) programs have seen to it that holding periods in 2012 will be measured in nano-seconds! Please forgive the hyperbole, but the impact of HFT programs is important to understanding market functions today. How it works is that these software algorithms trade their allotments of capital in rapid fashion – eating tiny fractions of pennies on each share they churn. The more they churn the more money lands in the hands of the algo trader. The offshoot of this is that the holding period of the securities bought and sold is such that ultimately the vast majority of investment capital recycles itself to cash. The problem for HFT algorithms then is that cash has to be held in a currency account somewhere – and like an impossible to see physics particle the cash removed from the equities markets leaves a shadow – making for latent free trading signals that sharp eyes can measure.

How Latent Trading Signals Can Be Measured
One way to measure the impact of fast-moving cash on a global scale is to monitor the incremental price movements of global liquid cash assets. One can infer that the cumulative effect of small movements over time translates into a shift either towards or away from risky assets. A good measure of movements of this kind would also tend to filter out noise (movements back and forth without sustained direction) – given that frequently such movements offset each other resulting in no net movement.

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