Market Manifesto

We speak here about wit­ness­ing the start of things before the start is eas­i­ly evi­dent.

Here we are look­ing at the begin­ning a trend, that is, the under­pin­nings of a trend — some­thing that occurs before there is enough evi­dence of what is hap­pen­ing for the crowd to real­ly notice it.

In con­ges­tions and con­ges­tion action trad­ing the crowd is wrong at the edges. The mar­ket goes down and tests sup­port and we can see the sup­port there but the crowd can­not see it; we buy the sup­port and the crowd sells sup­port. We are right and we are the win­ner, and we ride the trade back up to the top of con­ges­tion and sell resis­tance. The crowd has jumped on and is look­ing to ride a break­out but we see the sit­u­a­tion clear­ly and we sell the resis­tance and ride the con­ges­tion back into the range. And so it goes with con­ges­tion action trad­ing. But when we see the small details of the trend devel­op­ing – what is it that we are look­ing at before it actu­al­ly becomes evi­dent to the crowd, to every­body?

In every field there are things that the sophis­ti­cates see that the unso­phis­ti­cat­ed do not see. To the ordi­nary man in the street, an elec­tro­car­dio­gram looks like a bunch of squig­gly lines traced across a sheet of graph paper. To a trained car­di­ol­o­gist, these lines are an exquis­ite­ly detailed draw­ing of the elec­tri­cal pat­terns cre­at­ed as the nerve fibers fire off instruc­tions for the var­i­ous heart mus­cles to con­tract or relax. Tiny changes in one sec­tion of the T‑wave, can show a mus­cle labor­ing under anaer­o­bic stress, and fore­cast the pres­ence of artery block­age. A glance at the pat­terns can tell you vol­umes about the con­di­tion of a heart – if you are a trained observ­er. Oth­er­wise the car­dio­gram paper is mute.

And so it is with all tech­ni­cal analy­sis. If you under­stand what is being shown, you can see infor­ma­tion of great val­ue. If you don’t under­stand it, it is as if you were stone deaf and blind at a sym­pho­ny con­cert. The expe­ri­ence is locked away from you.

Nowhere is this more true than in con­ges­tion exit trad­ing. The sub­tle signs that show accu­mu­la­tion or dis­tri­b­u­tion, and the chart pat­terns that sig­nal exit from con­ges­tion and a move into new trend­ing activ­i­ty – these are com­mon­ly invis­i­ble to most mar­ket par­tic­i­pants.

But one oth­er anal­o­gy comes to mind. There is a tech­nique of intel­li­gence gath­er­ing favored by the CIA and oth­er intel­li­gence orga­ni­za­tions, and also by cer­tain trend-fore­cast­ing firms, who have the temer­i­ty to call them­selves “futurists.” Well, per­haps we need not mock their self-pro­mo­tion, in order to describe the use­ful­ness of their analy­sis tech­niques, and its rel­e­vance to the “futurists” who are futures traders.

The tech­nique is this: instead of look­ing to the large com­mer­cial mass media orga­ni­za­tion to reflect where the mood of the coun­try is going, the intel­li­gence offi­cers sur­vey thou­sands of small com­mu­ni­ty news­pa­pers. They take note of the sub­jects of the arti­cles that the local edi­tors choose to present in their severe­ly restrict­ed “news holes” in their pub­li­ca­tions. The local edi­tors have dis­cre­tion to print what they wish; they print what they judge will inter­est their read­ers; they select sto­ries and arti­cles from a mas­sive flow of infor­ma­tion. The sum total of these thou­sands of data points can accu­rate­ly por­tray what’s on the minds of a large pop­u­la­tion; when the empha­sis of this kind of news cov­er­age shifts, you can be sure that some­thing is afoot. It is the antithe­sis of top-down rea­son­ing; the data is hard to gath­er, but also hard to fudge. Prop­er­ly mon­i­tored over a long peri­od to time, this method of intel­li­gence gath­er­ing will flag a shift in cit­i­zen inter­ests long before such shifts appear in the mass mar­ket media, which are trend fol­low­ing by nature.

In a way, our mon­i­tor­ing has a sim­i­lar basis in real­i­ty. When we mon­i­tor support/resistance on the low­er time peri­od, we notice the way that near-by sup­port is held or bro­ken on a bar-by-bar basis. When we posi­tion our­selves with alert aware­ness to step on board the con­ges­tion exit bar, mon­i­tor­ing the slight shifts in support/resistance and flow, then we are also draw­ing con­clu­sions from many data points, and act­ing on infor­ma­tion that the mar­ket itself gen­er­ates in real time. We are the antithe­sis of the trend-fol­low­ing crowd. We are ahead of the game, and act­ing on good infor­ma­tion.

Of course, to be in a posi­tion to know, and to take action, we need more than pure knowl­edge.

We will need keen per­cep­tion, atten­tive­ness, direct­ed obser­va­tion, and guide­lines.
In short, we need a con­text with­in which to put our obser­va­tions, and then the obser­va­tions them­selves must be time­ly and accu­rate. We need to know what to look for.

In the field of tech­ni­cal analy­sis, more ink has been spilled try­ing to pre­dict the direc­tion break­outs will occur, than about any oth­er top­ic. And of course the answers are not obvi­ous, since a con­ges­tion by its very nature is a peri­od when the mar­ket is with­out direc­tion, as the var­i­ous play­ers try to sort out what is occur­ring.

Yet, in many cas­es, direc­tion can be fore­told, and we can posi­tion our­selves ahead of the crowd.