Pretty much backs up Ladelfina's chart in another thread.
Stuff goes on sale, people rush to buy. Prices go up, people back off.
Unless its equities or real estate. Then its the other way around.
I blame the media. Too much drum banging and fear mongering. Maybe if the news outlets ran some terrorized stories of how flat screen tv's and computers are...oh my god...dropping in price and there seems to be no end to it!!! Follow that with how homes and equities are deeply discounted for the holidays and reaching bargain levels!!!
Maybe you'd get a change in behavior. Eh, maybe not.
Those goods are used for consumption, however, in their intrinsic value as a good. The argument can be made that it is very irrational for housing because there is an intrinsic value and renting is an option, but stocks are an investment. For whatever reason in human psychology, the masses will want to jump on things when they are overpriced. You are probably right that it is the media who fuel a lot of the problems/fluctuations/volatility in financial markets.
Also, I think some of the effect of Fidelity's crazy range of cash is simply the performance of stocks, not the moving around. This effect at least mitigates some of what looks like ridiculous rebalancing abilities. Example, in September 2000, it looks like they are at about 22% cash and 78% rest. The S&P lost about 40% off of the top for that, and if the money market returns say 3%, then without rebalancing AT ALL you have 33.27% cash.
Without rebalancing.
All this reflects is the performance of the stocks during the time, not the rebalancing effects of money.
Don't know if you are specifically talking about Fidelity, but I feel that the investors themselves, if any rebalancing is necessary, are the ones who are putting more of their money in money market funds rather than Fidelity forcing them into it. In other words, the investors are the ones who are making the dumb decisions, Fidelity just facilitates it