Daily Speculations
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James Sogi
Philosopher, Juris Doctor, surfer, trader, investor, musician, black belt, sailor, semi-centenarian. He lives on the mountain in Kona, Hawaii, with his family. |
9/28/2005
The Rhythm of the Market, by
James Sogi
Appearing even more young and handsome than he is now, Chair appeared in the 1996 video with Dr. Schrade about music and the markets and it inspired some musical musings.
Traditional African music embodied complex rhythmic structures with 32 or more bars of differing and evolving and resolving structure, but it lacked melody and harmony. European music contained complex harmonies and melodic elements, but the rhythmic elements were primitive. It was the cross pollination of the African rhythms and the European melodic structure in the old South gave us modern music with its complex rhythmic and melodic elements. Despite the importance of rhythm, oddly, there is no intellectual property in rhythm. A musician can rip off beat for beat the exact same rhythm as another song, as long as the melody is different. Intellectual legal property rights do not even recognize the existence of, the differentiation between, and the importance of rhythmic elements and structure.
Chair's theory is that markets and charts share fundamental characteristics with musical structure embodying dissonance, resolution, tight ranges and soaring breakouts. However, the rhythmic element is just as important to a sense of music as harmony and melody. There are rhythmic elements embodied in markets whose beat must be understood, and measured. When playing music the musician counts the time, the time signatures, counts the rests, counts the beats and the notes, you have to be on time or its going to sound really bad. Some forms of syncopation are especially tricky to count right. Look at the counterpoint and retrograde action Chair highlighted in yesterdays and today's price action. Bach used a lot of music and music in reverse. The Beatles used it too.
Just like a good musician, a good speculator should count out the rhythms. Let s look at the current top 500 hits on the S&P. From 9/12-9/20 there were 60 (30 minute) bars. Before there was a big change is the key or range, and after a big drop down. Its interesting how musicians call the time divisions on the music charts bars as well as speculators. We are now at bar 53 of the current verse or stanza. If the rhythm stays the same, the music might shift again at the same or similar time as the last stanzas as stanza tend to have the same length to be emotionally satisfying. It would be in keeping with the current rhythmic theme. There is nothing to prevent a change in time signatures. The Beatles would often use different time signatures in a single song with interesting effect. But count your rhythms and you won t be playing out of time with the markets. Unfortunately, some cats just got no rhythm, man.
c
Jim Sogi, May 2005
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