May

31

 There are many speculators who have an inclination to trade during night hours. Such behavior exposes one to the possibility of premature death, according to a study of Penev et al "chronic circadian desynchronization…". In order to survive until that time, one might try to learn from the adaptations of night animals such as the raccoon, leopard, and mice. It's darker and colder and quieter at night and fewer prey are about. Particularly interesting to me were all the adaptations of fish for night survival.The article "where fish go to sleep" by Balzarova is highly recommended. Large pupils, asymmetrical ears, sleeping bags, taking advantage of a source of illumination, as the lion fish does, are helpful. The markets take these considerations into account, and make it hard to make a profit the same way taking into account the normal human need for sleep.

In talking about reversals of fortune, one should always take into account violent moves from highs to lows in markets. The recent move from a six month high to two month low in the stock indexes in three days is particularly noteworthy. Such moves occur about once a year in many markets, and it is interesting to consider the regularities that follow after they happen.Moves in the minutes before and after bond auctions have become particularly pronounced lately now that the financial institutions are strapped for funds, as all the fuzzy assets on their often 100 to 1 levered balance sheets are coming under closer scrutiny. The data from auctions on the long bonds should be adjusted and perhaps extrapolated from such studies.

I would like to see an extension of studies of the exact integers that mark the highs and lows in such active markets as bunds and 10 year US bonds, to see if there is any congestion, as has been shown for individual stocks, and areas from which there are non-random expectations. I hypothesize that prices slightly above and below round numbers are non-random within and at the end of day.

Larry Williams responds:

I am writing about this in my next market letter; that trading hours have upset the circadian rythms of millions of people and we need to learn the side effects of sleep deprivation and how to deal with it.

More on the subject as my research is completed.

Alston Mabry adds:

Makes me think of hiking in the desert and how a change of the same magnitude, occurring in different situations, can have very different consequences. If you go for a hike thinking it will be 75° F, and instead it gets up to 85°, that's not a big deal - you can tell the difference, but there are no serious consequences. But if you go out on a day when it's supposed to hit 105°, and instead it hits 115°, then your life can be in the balance.


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