Market Manifesto

We speak here of the prin­ci­ples of con­ges­tions.

We know that the mar­ket is almost always in a con­ges­tion of one sort or anoth­er, and that it is almost nev­er in a pure trend. Or so that is the con­ven­tion­al wis­dom.
We say that between 80 and 90 per­cent of the time the mar­ket is in con­ges­tion.

But we should remem­ber that we must always look at var­i­ous time­frames – the hourly may be in a trend run, and the dai­ly, also, at the same time that the week­ly or the month­ly is in con­ges­tion, or enter­ing con­ges­tion, or exit­ing con­ges­tion. One type of trad­ing in one time­frame does not mean that the same type is oper­a­tive in anoth­er time­frame – not even close. We may see any or all of our five types of trad­ing in effect in dif­fer­ent time peri­ods, or we may see the same type of trad­ing in sev­er­al time­frames at once. They oper­ate inde­pen­dent­ly of each oth­er and the fact of a con­ges­tion or trend run in one time peri­od does not require the same type of trad­ing in anoth­er time peri­od. Of course this is not to say that the inter­play of time­frames does not exist, it does and it is absolute­ly crit­i­cal. But we do not expect the same types of trad­ing to nec­es­sar­i­ly exist in dif­fer­ent time­frames simul­ta­ne­ous­ly.

What do we say about this nat­ur­al state of con­sol­i­da­tion that we call con­ges­tion?

Well, we can say that if life con­sists of ener­gy, that ener­gy is not sta­t­ic. Ener­gy is con­stant­ly bounc­ing around look­ing for the lim­its of what­ev­er venue it inhab­its at the moment. (Or per­haps it would be more accu­rate to say, what­ev­er venue we hap­pen to be observ­ing.) When ener­gy is bounc­ing around with­in known lim­its, we can say that this ener­gy is in con­ges­tion, and the char­ac­ter­is­tic of con­ges­tion is a dri­ve for effi­cien­cy. When the ener­gy pokes through cur­rent or con­ven­tion­al bound­aries and sets off look­ing for a new set of lim­its or bound­aries, then we might say that this ener­gy has left con­ges­tion and is break­ing new ter­ri­to­ry, seek­ing a new con­text for itself. The empha­sis then is not on effi­cien­cy but on dis­cov­ery.

But let’s stay with our focus on the nature of ener­gy with­in bound­aries.

We have many analo­gies of ener­gy in con­ges­tion. Think of a nation­al cor­po­ra­tion that is devel­op­ing its exist­ing mar­ket. It carves up the mar­ket into sec­tions, and then starts to find and cul­ti­vate cus­tomers with­in these mar­ket seg­ments. As the region is devel­oped, the cor­po­ra­tion divides the mar­ket every more fine­ly and works the ground ever more rig­or­ous­ly until the mar­ket is sat­u­rat­ed. If it wish­es to open a new area, say to begin oper­a­tions in a for­eign coun­try, then it might estab­lish a branch office there. The first chal­lenge is to gain a toe­hold, and this requires ener­gy and effort beyond the ordi­nary. It is break­ing into a new ter­ri­to­ry, and effi­cien­cy is not a high pri­or­i­ty. Once the office is estab­lished, and some ini­tial mar­ket share acquired, then the coun­try can be bro­ken into sales regions, and the process of con­sol­i­da­tion – of devel­op­ing effi­cien­cy and work­ing the ter­ri­to­ry in ever-small­er seg­ments — can com­mence. Sim­i­lar prin­ci­ples apply to grass-roots polit­i­cal orga­niz­ing.

Or think of an explor­er estab­lished in a base camp. The ter­ri­to­ry right around the camp can be ful­ly mapped and cat­a­logued, and all of the flo­ra and fau­na and nat­ur­al fea­tures of the area might be care­ful­ly devel­oped. We would find struc­tures and devel­op­ment spring­ing up – gar­dens and out build­ings and sup­port ser­vices and so forth. Pret­ty soon we would have a small city, like the huge base camps that the U.S. Navy has built on Antarc­ti­ca. The site has become devel­oped. This is con­ges­tion activ­i­ty — the more time the Navy spends there, the more efforts become known, famil­iar, rec­og­niz­able, and repet­i­tive. This is quite dif­fer­ent from the kind of activ­i­ty that aris­es when a probe it put out to explore a new moun­tain range deep in the Antarc­ti­ca con­ti­nent.

We pick this exam­ple because we have a friend who was con­duct­ing geo­log­i­cal research in remote regions of Antarc­ti­ca. In lis­ten­ing to his descrip­tions we were struck by the estab­lished nature of the base sta­tion, with all the ameni­ties, and the Navy bureau­cra­cy, and the many rou­tines. In many ways one could have been in Nor­folk and not Antarc­ti­ca. But then the scene shift­ed, and the time came for our friend’s explorato­ry research into areas three or four hun­dred miles away from any oth­er humans — des­o­late bar­ren flats and moun­tain ranges. Here, the heli­copter pilots would basi­cal­ly drop our friend and his assis­tant, wait with rotors whirling until he made radio con­tact with the base sta­tion, and then fly off again leav­ing him for many weeks at a time to con­duct his research on the weath­er­ing pat­terns of rocks in the Antarc­tic wilder­ness. Well, here the empha­sis was not on effi­cien­cy. Much time was spent in prepa­ra­tion, to be sure, not so much in train­ing for the known, and how to han­dle the rou­tine, but in learn­ing how to han­dle the unex­pect­ed, the unknown, the unpre­dict­ed.

We see once again the com­mon, nat­ur­al, and repet­i­tive cycle of dif­fer­ences between ener­gy unbound and ener­gy con­tained, between explo­ration and devel­op­ment, between unre­strained out­put and the effi­cient con­ser­va­tion of effort.

Let’s think about some nat­ur­al phe­nom­e­na.

When a vol­cano erupts, we can think of this as a major dis­e­qui­lib­ri­um; when the lava flow cool and con­sol­i­dates, the sys­tem is restored to equi­lib­ri­um and the new land mass slow­ly starts to devel­op into an ecosys­tem. A riv­er engorged with a mul­ti-year high water flow will cut a new path in its rush to get this water to the low­er reach­es of its water­shed. When the waters recede, the new riv­er path will be rough and coarse, but over time the riv­er will process the land­scape and, in what we could call con­sol­i­da­tion, will estab­lish grav­el beds, beach­es, chan­nels and sand bars, all mea­sures of effi­cien­cy and devel­op­ment as expressed in the lan­guage of the riv­er.

An artist paint­ing a pic­ture will fre­quent­ly sketch out the out­lines so that the struc­ture and frame­work of his pic­ture in known. Often this sketch is done rapid­ly, with a sense of excite­ment, and a feel­ing of dis­cov­ery as the out­lines of the pic­ture are laid down. Then comes the slow­er, more painstak­ing process of fill­ing in and fin­ish­ing off the pic­ture, as the artist lays down col­ors, and details the tex­tures and col­ors and high­lights and shad­ows. This is the stage of artis­tic devel­op­ment.

Well, we could con­tin­ue, but you get the idea.

Why is the mar­ket so seem­ing­ly eager to estab­lish con­ges­tions? Why does it spend more time in con­ges­tion as opposed to trend?

Is the nat­ur­al world not more inter­est­ed in expan­sion, in break­ing new ground, in estab­lish­ing new footholds and uncov­er­ing whole new vis­tas?

In a word, no. The nat­ur­al forces of the uni­verse are con­ser­v­a­tive in nature and have more of a ten­den­cy to carve out pro­tect­ed space or to take advan­tage of an area that lies with­in dis­tinct bound­aries than to strike out for the unchart­ed unknown. In nature we see ener­gy spilling over into new areas when nec­es­sary for food, room to live, room for the nat­ur­al expres­sion of aggres­sion, room to feed and pro­tec­tion the young of a species, room to enhance or pro­tect a gene pool, room to pro­cre­ate. But if it is not nec­es­sary, then the tribe, the herd, the flock, the dom­i­nant male, the insect colony, the plant species, the par­a­sites, the hosts – most all nat­ur­al phe­nom­e­na are hap­pi­er when doing their thing in estab­lished con­fines than con­stant­ly seek­ing some­thing new for the sake of some­thing new being found. The fun­da­men­tal ways of nature are con­ser­v­a­tive, and effi­cient. When new ter­ri­to­ry is need­ed for any one of a mil­lion dif­fer­ent rea­sons, then that is anoth­er sto­ry. But in nature, ener­gy expan­sion is more com­mon­ly seen as ener­gy “spilling over” into new areas under con­di­tions of duress, or neces­si­ty, than expan­sion of ener­gy that just occurs because there is no oppos­ing force. In the jar­gon of our mar­ket analy­sis we might say that a “no” pat­tern can­not live with­out a “yes” pat­tern and a “yes” pat­tern can­not exist with­out a “no” pat­tern. There is always an oppos­ing force for every unit of ener­gy, since the oppo­si­tion cre­ates that ener­gy in the first place.

But you need not believe every detail of our mod­el of the world for it be a valid mod­el for the lim­it­ed pur­pos­es of mar­ket study. The mod­el is clear enough to show that the idea of new areas of devel­op­ment is uni­ver­sal. The mar­ket is in con­ges­tion 80 per­cent of the time or more, and that should be enough for you to see that it makes sense to devel­op a strong under­stand­ing of how bor­ders devel­op, and how they hold over time, and then how they decay and break­down. When they hold, then we have con­ges­tion, and there are good mon­ey­mak­ing tools avail­able to you for use dur­ing these times. Then the mar­ket will even­tu­al­ly move to estab­lish new bor­ders and new areas of con­ges­tion, where the process of har­vest­ing or extract­ing mon­ey from these areas can begin all over again.