Remember I am not giving a financial analysis, or investing advice, consult an analyst, broker etc. for this. This is simply data for the ideas in this blog. Without data, it is very difficult to draw coherent conclusions, it is part of the problem in forex the data is there, but how it affects the market is unclear.
At least in equities one has something to hold onto, the market tends to bring companies with strong financial statements up to their market valuation, or beyond (the point where one usually sells). ACM is most interesting. Look at its lifetime chart data, candlesticks preferably (OHLC are good for indicating reversals, but candlesticks carry a lot of structural data).
Note the spike in early 2008, a probe of a valuation which only the depths of the crisis could breach, when there were vast liquidation sales from margin calls, the family silver being sold off in a forced sale.
The resistance it has found in recent months is near the important technical level of 25 (a bit like a super slow motion version of the phenomenon in in forex, at .25, in some cases), but it references precisely the body of the candle at that spike low in early 2008.
Candle bodies, especially on long term charts seem to carry a kind of reference to the entire structure of the market referenced to money flow. What I mean is they may contain data about the growth processes within the Dow as well.
That may be the source of the exact reference here. Remember this blog believes the processes in the Dow while drawing on optimization processes like and from forex are not optimization processes.
The processes of the Dow can be exact, they need to be. Think about Fibonacci growth processes, drawing from the constructive properties of fractal geometry, very much in the Dow.
They have exactness, that is the advantage of something constructing from itself from some kind of control program molded by evolution, it can only be exact (this blog believes remember these evolutionary processes are not in forex).
But this exactness is undeniably distorted by money flow, which is a random event, in essence. Money flow is determined by that risk on/risk off phenomenon which has characterized the markets since the crisis and before, when the market was shocked into being basically a money flow event.
It may be such a event has a deep structuring effect, those memory processes which are supposed to be about growth become hijacked by money flow.
This is another more profound reason why interest rates need to be raised to allow the crucial computational nature of the market to reassert itself, to bring equity to inherent value (usually expressed in financial statements) in an extraordinary post-fact deterministic calculation.
Of course the more company share values are a function of money flow in theory the easier it is to control those values. But of course this does not work, a classic example being the slide down from the flows consequent on very low dollar interest rates. The forex market is a pure example of this, and it notoriously does not work here, look at what happened at EUR/USD 1.5.
It may be that growth factor is exactly what brings the Dow its periodically corrected trendlines ever upwards. Interfering with this may stop the next surge, which fine grained fundamentals suggest is likely, for example the extraordinary creativity and strength of Internet technology companies.
All this suggests reasons why the economy may be fundamentally healthy, but the funding sources are still a mess.
© 2010 Guy Barry - All Rights Reserved.
