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Health and Sickness, by Victor Niederhoffer

I wrote on Nov 9 about a most unsettling day in the market with all commodity futures up 2% right after the election. It was followed by a most healthy day with commodities down an average of 3% and some down much more.

It brings up the immediate thought that after cardinal events like elections there is a tendency to back and fill, trying to get you to get on the wrong foot like a good competitor in any game including the favorites here of chess and checkers, martial arts, and racket sports ( the defunct game of hard ball squash being the only thing I am expert about ).

The general question of healthy and unhealthy days in the market is a very pungent one that deserves study. Today, bonds are at a new 10 month high, and the dollar is low, and the Saudi Arabian market is pushing 8,000 again -- down 60% for the year. How should healthy days be defined and what predictive properties do they have?

Along those lines, another aspect of wellness is the health of the market for the big players -- the ability of the market to survive, recirculate the energy, carry away the wastes, providing food and hope for all the niches in its community -- is the movement in markets during the day. It must be sufficient to get the public to do the wrong thing and to create frictional costs to cover the costs of the infrastructure and the profits of the larger feeders in the chain. Tuesday's 16-point range in S&P futures (high 1399, low 1383) is the biggest since the 04 Oct 19-point range (high 1359, low 1340). It was very nice because it went down 9 points from the open at the low and up 7 points from the open at the high -- enough to get everybody leaning the wrong way, selling at the bottom and buying at the top, with a thousand other emotional trigger and chart points to do the wrong thing also. A most healthy day for the market for sure. But what does it portend for the future? Slightly bearish in the large, but in particular slightly bullish is a reasonable counting answer, but how can one generalize such health for the infrastructure days. One might suggest studying days of running maximum ranges as to their predictive properties. One believes that some meals for a lifetime are contained within the above lines of inquiry that might be used to answer such questions of strength.

P.S. Try graphing the consecutive points (a, b) on the S&P chart of Nov 13th and draw the points (a,-b) for a hypothetical chart of Nov 14th, and then query whether the degree of overlap between the hypothetical Nov. 14th chart and the actual Nov. 14th chart is random, and if you conclude it isn't, under what conditions is such a non-randomness predictive and/or useful? Alternately, flip the 13 Nov chart upside down and enjoy the Adam Theoretic aspects.