The Market's Odd Behavior

I thought it odd that U.S. equity markets did not react more strongly on Fri. to the disastrous earthquake near Sendai, Japan.

One theory is that markets can only absorb limited amounts of information. Some of the economic news from the U.S. was positive and there were no violent demonstrations in Saudi Arabia as feared though some skirmishes were reported.

On the other hand, the great natural disaster in Japan, the ongoing sovereign debt crisis in Europe along with the downgrade of Greece, rising social tensions in China, and elevated commodity prices seemed not to be a consideration in trade.

I do not believe that there is a "capacity limit" for markets to absorb information. The overall size and competitiveness of trading precludes any exclusion of relevant information.

However, the current time is of great uncertainty. In the mathematical sense, uncertainty means that it is not possible to identify alternatives or to assign a probability to each alternative. More likely this is the cause of the unusual reaction of American markets to world affairs on Fri.

I will have more to write on this topic.

By Mon. markets will have much more information and I think there will be a significant drop in prices as equity markets have had an impressive rise since Mar. 2009.