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editorial@xxxxxxxxxxxxx wrote:
> -The problem, of course, is that, while there may be a (temporary) correlation between certain markets, that is no reason to suppose that there is any sort of *causal* relationship between the two.
>
> Good trading,
>
> OM
There are indeed two kinds of Explanations which many get wrong. "Causal Explanations where A happened because of B etc (positive nature). Then there is Cybernetic Explanations (negative nature) where we consider what alternative
possibilities could conceivably have occured and then we ask why many of the alternatives were not followed so that the particular event was one of those few which could, infact occur.
That is the main falacy with those who first try Intermarket analysis and then dismiss it. They are trained to use Causal analysis. How in the world do you expect their ontology to make any sense if the premise of their epistemology is
wrong!. InterMarket analysis is based on Cybernetic explanations.
Any Chaologist attests to Markets being holistic in nature. Made up of Meta relationships. All Macro Arbitrage trading and Macro Analysis are based on InterMarket Analysis. Now one cannot prove a system is right, but relies on its expediency
for success. The Fact alone that the Quantum Fund N.V, Midas Fund, and the other Macro Fund outperformed the S&P over 30 years running speaks alot in its favour.
Dow theory's tenet is based on InterMarket analysis where correlations between the Industrials and Transports give good indications.
Novice TA's always believe patterns are simply the triangles, wedges, head and shoulders etc that occur on charts. Get a couple of books that show you chart patterns and learn by rote-learnings (learning), instead of deutero-learning
(learning to learn). What I find totally supprising is they accept the human mind is hierarchical in nature yet fail to search for patterns, meta patterns, meta reflexive patterns and resistances at various macro levels. Patterns come in
different levels. The basic patterns can show you a profit but undiscovered Meta patterns gets you the home run.
Supprising too is how many dismiss the lakers correlations. Victor Niederhoffer in the 80's was approached by the best in the business including Soros to manage their money because of his hypothesis that Markets sometime follow a Casino like
approach proved expedient. He returned over 80% one year by betting on the correlations between the Chicargo Bulls and the Markets during those days. If markets are emotional, don't you think you can find patterns in the source of the emotion
when it becomes self evident.
Dismiss InterMarket Analysis and correlations and you might as well count Marty Zweig off (Among the Best on Wallstreet). A typical example. Just before the Fed meeting this year I collected data dating back from 1972 of Fed Policy meetings
followed by a short term Post-Event Window of the Markets perfomance. It turned up with a strong pattern of predicting short term Market direction every time the Fed raised or reduced by more than 1/4 point. Based on my analysis I could short
without discrimination during the Post-Event Window time frame. This to some might be mumbo jumbo but what really matters is how much you make when right.
On a finall note, when Alchemy of Finance was first published by Soros, he basically was giving his secret away. "Use your mind more, contrary to finding the perfect formula for praxeological events" Allow your mind to run free with Heuristic
concepts and let the market dictate which concepts are expedient. Most minds are trained to think by induction from Data to hypothesis and never by deduction from hypothesis drawn from the laws of nature and phylosophy. This is what David
Hofstadter (Author of Godel, Escher, Bach an Eternal Golden Braid), Gregory Bateson (Author of Steps to an Ecology of Mind), Dr. Gabriel Burstein (Author of Macro Trading and Investment Strategies) advocate. Observing patterns where others
see only noise. Many ignore this road because it involves to much work and constant reading. No wonder only a few hit the home run.
Do the Lakers have game? Don't know but I would like to know which team most traders favour, then see some past data. ... before dismissing it as mumbo jumbo. "The greatest ideas are the simple ones" .... Alfred North Whitehead
Regards
Shawn Andrew
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Ricercar Fund /SA "Quarendo Invenietis"
http://www.RicercarFund.com
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"It is not how right or wrong you are that matters, but how much money you make when right and how much you do not lose when wrong." ... George Soros
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