Daily Speculations

The Web Site of Victor Niederhoffer & Laurel Kenner

Dedicated to the scientific method, free markets, deflating ballyhoo, creating value, and laughter;  a forum for us to use our meager abilities to make the world of specinvestments a better place.

 

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05/26/2004
James Sogi: Market Music

"Meme-Weaver", a recent chart buster by Kim and Kevin & the Spec-ettes, brings to mind how music appreciation can help being in tune with the market. When you ask the Market Mistress to dance, you had better know the tune.

When I jam with my rock band M.A.R.S. (Middle Age Rock Stars), every once in a while we get a good groove going and an interesting thing happens. I look down at my hands... the music is coming out, but its not "me" that's playing. I see the drummer drumming and the guitar player playing, but there's an "invisible hand" guiding the groove and the musicians are just grooving along. It's a good feeling. The whole is more than the sum of us playing.

When you step on to the dance floor, you hum the waltz 3 / 4 time, oom'-pah-pah oom'-pah-pah with emphasis on the first beat. When you hear the orchestra pick up a nice 4/4 you get out your trusty fox trot. When the calypso starts, you dust off your rhumba. This allow you to stay in the groove, and dance along and not step on your gentle partner's toes. No effort, easy.

The market has rhythms too. A good ear will tell you to waltz or fox trot. Definitely you don't want to fox trot when the market is waltzing. Lets look at some market rhythms. Yesterdays action just after the Fed announcement was a nice quick 5 min waltz up, and a retrograde waltz back down. Now if you had been humming a waltz, you would have been grooving. If you were humming a fox trot... well maybe tomorrow. Looks like the Market Mistress likes to waltz.

The daily's have had a nice waltz down this month. Same thing in March. Classical and modern composers use changes in time signatures to set up tensions and transitions. The use of a passing note, or holding a note for several beats introducing a new theme in the piece. A long extended coda repeating a theme over and over, like the last several months in the market, may signal the end of the song and the transition to a new song. Look for these themes in the market, be singing the right tune, and maybe, just maybe the Market Mistress will ask you for a slow dance next song.