I wonder what he’d think of the relationship between the US dollar and equities, where this small action produces that decidedly unequal reaction.

After the Federal Reserve acted to shore up bank balance sheets by buying long bonds and mortgage-backed securities last week, the dollar trampolined and markets dropped like Newton’s apple.

Pundits blamed dismal economic data. Yet we saw money market-wide shifting from equities September 16 with quad-witching. Before the Fed offered a dim economic portrait. If money was reacting, it sure had a funny, proactive, organized way of showing it.

Today and Monday, the dollar weakened and stocks zoomed skyward in a Newton-flummoxing frenzy to reclaim paradise lost. How many believe this is rational investment behavior? If you do, there’s a solar-panel plant in California that might interest you.

Also today, the SEC proposed reducing trading-halt thresholds and calibrating them to the S&P 500. Circuit breakers would interdict trading if the index falls seven percent. That’s down from current triggers tied to the Dow Jones Industrial Average at 10% off.

Monday, the Securities Technology Monitor, a trading periodical, reported that 72% of fund managers surveyed by Lodestar Research were concerned about their methodologies for calculating risk-exposure in markets.

All these things are related. Stocks and dollars are a laboratory example of the butterfly effect from value uncertainty in both. The gap between actions and their reactions are growing alarmingly disparate because uncertainty must be hedged by something unseen. Yin moves from yang to double- or triple-yang.

It should be no surprise that institutions are most concerned about managing risk with automated systems. What’s it say about our markets when the resonant timbre is not opportunity but threat?

And regulators. They don’t know what’s happening because their data are fragmented. Welcome to the public-company club, SEC. Somehow it’s acceptable for regulators to propose spending billions on their monitoring systems while the participants whose fair treatment regulators exist to ensure labor with a shattered and inchoate view of who trades their shares and where – thanks to rules.

Does this seem dissonant? Like the market?

Last week we sent a group note to key folks at FINRA and the SEC and a couple congressional staffers saying there are 5,500 volunteer policemen out here who’d like markets to function properly. Public companies. After 18 months of talking and talking, we now know that FINRA can authorize exchanges to provide the missing data to public companies through a simple rule filing.

The good news is that we need no act of Congress to modernize trading data for public companies. And yet here labor on public companies in dark chaos still, as regulators flail about trying to control the movement of stocks.

What’s so hard here? The apple is lying there, right by the tree. Toss it over, or at least throw public companies a bone.

As I move the midsection flab from a grand Thanksgiving holiday aside to get at the keyboard (a little humor there), the US equity markets are closing up again. IR folks and executives, what’s proving the most accurate indicator of market direction lately? And what’s it mean to your own market structure?

“Market structure” is your trading environment – what’s setting share price and driving trading volume. In business, there are metrics of health ranging from EPS, to cash-flow ratios, to margins, to operating statistics like subscribers, or phone lines, or manufacturing capacity, or load rates.

The same is true for market structure, except the metrics aren’t financial or operational, but measures of speculation, investment and risk management. Tracking the effects of these forces offers a highly accurate picture of the health of your market structure. As you long-time readers know, we believe market structure measures are fundamental now, the same as MRIs for medical diagnostics or satellite images before sending troops into battle.

Back to our question above, about the most accurate indicator of market direction, have you got your answer in mind? Okay, it’s this: the dollar. Go run a graph. For at least a couple months now, US equities move with inverse correlation to the dollar. When it falls, stocks strengthen. When it rises, stocks drop. Now, why would that be?

As you ponder that, consider this too. Trading data show a steady if subtle migration of volume – lighter now than in the summer – to pure quantitative multi-asset-class systems. It makes sense to us. If financial securities modulate according to US currency, which ripples through various asset classes from bonds, to commodities, to fixed income securities, and then alpha forms between global markets, why wouldn’t you trade on high-speed data rather than financial measures? It’s, as Sherlock Holmes would say, elementary, my dear Watson.

Thus, institutions shift their focus further from business fundamentals to instances of speculation and risk-management. Profits come from brief divergences in asset classes. It becomes a foot race for trading systems. If the dollar strengthens and US stocks fall, where will they rise fastest and where do you trade puts and calls? Probably Asia. And maybe you trade some corporate bonds and some US futures too, knowing the dollar will fall again, positively impacting these asset classes.

Do you see the problem? You will be rewarded less for running a great business. We return to this issue because it’s the heart and soul of our profession. We are the marketing and communications function for the world’s great long-term investments. Let’s fight for markets that reward effort rather than foot speed in very short sprints.

So why does a weak dollar reward stock prices? Give us your thoughts!