The Primal Market

By Woody Dorsey  FEB 01, 2008 1:15 PM

Investors are primal and psychological, thus they are contrarian.

 





Calling All Primates


All investors are influenced by the primal screen. You know, that piece of hardware with all the pixelated, blinking tickers in front of you?

We're primates. Our trades are primal. Always have been. This is the basis of all technical analysis. Everyone thinks of themselves as original, but the primal brain has a natural genius for imitation.

I visited with Todd on Tuesday. He pointed out my suggestion in Buzz & Banter that stocks would rally into today or Monday. Nice pop! How did I do it? I followed the primal trade. After all, what are the duration heuristics after the January 23rd purification purgation in risk appetite?

An all-new forecast form Mr. Market follows, but the important diagnosis: What a nice new corner office Toddo has! His feng shui is excellent. There's an intriguing putter by his desk, but no golf balls to play with. What's up with that?

Market Icons

We trade according to whatever market script we're following. What are we following anyway? We're all imitating some idea, some stock story, some market meme. On our computer screens, we point and click on icons. An icon is, after all, admired and followed.

And so we follow stocks. We follow tickers. We follow market mavens. We are followers. This is normal, primal behavior. We can't change it, but we can follow the followers.

Follow the Followers of Money

Investors are primal and psychological, thus they are contrarian. Furthermore, they're rational, which explains the influence of fundamentals. According to the Trinity Theory of finance, these three cognitive factors determine all market behavior.

Google Mr. Market! Alas, he has no ticker. He's hard to follow. I try to channel Mr. Market, but there are broadband issues. I can't seem to do it. But I've become friendly with his caddy, and sometimes he gives me yardages. Speaking of yardage, Mr. Market hasn't quite made up his mind to turn seller again or to squeeze the shorts some more. He wants to see Sunday's yardage result before parsing out the next play in the market. He's toying with a top on Monday's open, but he does consider that the extreme trend duration heuristics allows inconclusive squeezes as late as February 11-15. At least that's what his caddy's saying. I'll follow his caddy. Stay primal.


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