It's about economics. Money doesn't really flow into equities. It flows into risk. The highest risk asset sets the market price for risk which we will call the marginal product of risk. The highest risk asset sets the price because being at the margin, it's the first asset to get sold in a risk averse environment. Being the highest risk asset, it also has to produce the highest rate of return. Therefore this "risk" asset is where money flows to capture margin. Don't worry about the type of asset or which country, that will only confuse you. Just think of risk as a stand alone product that openly trades in the marketplace. So logic would tell us that when capital seeks out risk and flows into regions where that return is provided, then capital will be allocated into various risk assets based on different levels of risk appetite. The same is true when risk is sold and liquidity is sought. Liquidity is synonymous with safety or protection. So by watching where capital is flowing around the world you can deduce what the risk appetite is for capital and from there it's a relative value game. Where can one earn a given return with the least amount of risk.
Absolutely agree which is why I would need a good risk/reward to put the trades on. I'm looking at a couple ways of expressing my idea. Shorting momo stocks, or going long volatility. Ideally I'd like the next couple of days to play out with the markets moving higher but the nl not confirming, and then getting the gap up on Monday and having a good reference point to get out if I'm wrong. I'll post here if it plays out, been quite in here lately.
There's a whole new bunch of people joined here since he 'left' who've never heard of him. He should build up a loyal following fairly quickly.
This is why I encourage all users of ET to become very familiar with the search function in the upper right hand corner.