Indexes starting the week with a rally. Optimism over various interventions for houses holding bad paper such as the nationalization of Northern Rock has all the free enterprise crowd so happy. Price action rallies have edged higher with the hope the worst is behind the market. Some have pointed out the trading volume remains historically high despite falling benchmark returns. This being interpreted as proof the brokerage/trading industries damage will be minimal.
Looking on the bright side of the last couple quarters is certainly a function of the search for vital signs in the investment world. Interpreting the data however is not easy. The average increase in volume is skewed by December and January in large part as a function of the extraordinarily large risk adjustments due real bad trading strategies being outed. Those were exceedingly rare price events, although the poor trading talents of bankers and hedge types should never be underestimated. The markets still need the bull to sustain big volume. But part of the volume story is true. Lower costs and the growth of algorithmic trading has generated more volume across more markets. Further, there is still a sea of money pursuing speculative sectors in Bubbleland. The current bubble boys are visiting agricultural commodities, gold, and oil. The fools apparently are not done yet.
