Market Movers
アップデート済
What will happen when an unstoppable force meets an immovable object?
-- Market Basics --
Commodities are like an "immovable object". They have no legs, they pay no dividends / yield rates.
Unlike stocks, owning them doesn't give you the ability to "vote" for the growth of a company.
When you buy them, you don't get a "souvenir" contract to hang on your office wall.
Commodities are materials, so cumbersome that you have to store them in a freaking silo.
Commodities don't expire. You can only buy them, store them and sell them. Perhaps convert them into some other material, but this is in sense a sort of selling and buying.
Either we are talking about hard commodities or stocks, markets are based on the exchange of rare / (semi) fixed supply of goods. Markets is a massive supply of goods.
But to dance there must be two. If there was nobody to buy and sell, then there would not be any market. Natural/abundant materials like sea water, Markets is a massive supply of traders.
-- Market Patterns --
On the main chart I have drawn some colored lines. The zig-zagged orange ones (I call them springs) represent periods of accumulation (or distribution), while the blue abrupt ones represent bull (or bear) corrections.
The same springs appear innumerable times in recent Bitcoin history. This cryptocurrency goes through apparent periods of accumulation (orange) and distribution (blue). All of these ovals are periods when price movement takes the shape of a "spring", and between them a short correctional move.
-- Wyckoff Analysis --
Wyckoff made some observances of how markets move. Just like our previous analysis, we witness the same "upwards springs" usually seen in periods of distribution. A similar chart can be plotted for accumulation periods.
-- Art of Discount --
Capitalism is the art of discounts. A shop (seller) can find customers (buyers) simply by lowering prices (and good advertising). It is the act of deliberate price change that causes market movements.
Consider the following scenario.
A very specific shirt from a known brand can be sold in innumerable places throughout the world. The historical price of this item is also tracked by financial firms. We consider a fixed supply of this item (this shirt is produced for one year only).
Every day copies of this shirt are sold in similar prices (but not identical). A shop can make slightly better discounts to encourage buyers. Another shop in a tourist area can have higher prices due to increased demand. We realize that, while the financial firm tracks the "spot price" of a commodity, it is just calculating an "average price" of the underlying asset.
-- Business 101 --
A seller will not sell lower than what they bought.
Not all shops are equal. Some of them may have made a large initial order of shirts with a good price from the factory. Other ones made smaller orders with higher initial buying price. Therefore, the following table can be constructed of the available supply of shirts, based on initial buying price.
1000 shirts of $10 each
500 shirts of $11 each
250 shirts of $12 each
125 shirts of $14 each
125 shirts of $17 each
IPO is the weighted average price (1000*10 + 500*11 + ... ) / 2000 = $11.1875
(notice that these prices are the ones shops bought from factory, let's say the final selling price to the customer is 2x of the prices above)
-- Market Psychology --
With ample supply of shirts, a reasonable buyer will almost certainly buy the best offering they can. They will obviously buy from the cheaper shop they can find, one of the many which have prices of $20 per shirt (2 * $10).
While prices are fixed, buyer habits are not constant. They will gradually exhaust the cheaper end of the supply. When 500 of the cheapest shirts are sold, the average price is calculated again. Now there are 500x10 + 500x11 + ... with a total of 1500 and an average price of $11.5833
Price before demand: $11.18, price after demand $11.58
Unsurprisingly, demand has caused prices to increase.
Of course this change is not linear. Shops which bought at $10 and have many sellers, will attempt to increase prices from strong demand and increase profits. Price increase will inevitably result in lower demand. The inevitable crash will follow. Demand has vanished and prices abruptly crash. This happens when all $10 shops reached the selling price of $11 ones. A rapid correction back down to $10 follows. A chart of Bitcoin is shown to demonstrate this oscillation.
-- End of the Road --
The exact same happens in periods of accumulation in the end of the cycle.
In the initial period of market cycles, prices have their lowest price, in the end the highest. (this is not always the case, but it is always the target)
When most shirts are sold, all shops are still working, most of them have supply in hand, and selling prices have reached $34 (2x$17). It is then when the most expensive of shops have their chance to make their target profit. Prices have gone so high and the new season is right around the corner.
We have reached a dilemma.
We cannot increase prices much higher because demand will not show up. If the most expensive of shops cannot reach their target price of $34, they will definitely have to make $17 per shirt to break-even. It is that pressure which makes sellers slowly and progressively reduce prices to find demand. A downward zig-zag is taking shape.
-- Conclusion --
This entire idea is by itself a conclusion. A tale of a fight between the unstoppable force of traders against the immovable object of assets. The chaos of capitalism simplified.
Everything should be made as simple as possible, but not simpler.
Tread lightly, for this is hallowed ground.
-Father Grigori
-- Market Basics --
Commodities are like an "immovable object". They have no legs, they pay no dividends / yield rates.
Unlike stocks, owning them doesn't give you the ability to "vote" for the growth of a company.
When you buy them, you don't get a "souvenir" contract to hang on your office wall.
Commodities are materials, so cumbersome that you have to store them in a freaking silo.
Commodities don't expire. You can only buy them, store them and sell them. Perhaps convert them into some other material, but this is in sense a sort of selling and buying.
Either we are talking about hard commodities or stocks, markets are based on the exchange of rare / (semi) fixed supply of goods. Markets is a massive supply of goods.
But to dance there must be two. If there was nobody to buy and sell, then there would not be any market. Natural/abundant materials like sea water, Markets is a massive supply of traders.
-- Market Patterns --
On the main chart I have drawn some colored lines. The zig-zagged orange ones (I call them springs) represent periods of accumulation (or distribution), while the blue abrupt ones represent bull (or bear) corrections.
The same springs appear innumerable times in recent Bitcoin history. This cryptocurrency goes through apparent periods of accumulation (orange) and distribution (blue). All of these ovals are periods when price movement takes the shape of a "spring", and between them a short correctional move.
-- Wyckoff Analysis --
Wyckoff made some observances of how markets move. Just like our previous analysis, we witness the same "upwards springs" usually seen in periods of distribution. A similar chart can be plotted for accumulation periods.
-- Art of Discount --
Capitalism is the art of discounts. A shop (seller) can find customers (buyers) simply by lowering prices (and good advertising). It is the act of deliberate price change that causes market movements.
Consider the following scenario.
A very specific shirt from a known brand can be sold in innumerable places throughout the world. The historical price of this item is also tracked by financial firms. We consider a fixed supply of this item (this shirt is produced for one year only).
Every day copies of this shirt are sold in similar prices (but not identical). A shop can make slightly better discounts to encourage buyers. Another shop in a tourist area can have higher prices due to increased demand. We realize that, while the financial firm tracks the "spot price" of a commodity, it is just calculating an "average price" of the underlying asset.
-- Business 101 --
A seller will not sell lower than what they bought.
Not all shops are equal. Some of them may have made a large initial order of shirts with a good price from the factory. Other ones made smaller orders with higher initial buying price. Therefore, the following table can be constructed of the available supply of shirts, based on initial buying price.
1000 shirts of $10 each
500 shirts of $11 each
250 shirts of $12 each
125 shirts of $14 each
125 shirts of $17 each
IPO is the weighted average price (1000*10 + 500*11 + ... ) / 2000 = $11.1875
(notice that these prices are the ones shops bought from factory, let's say the final selling price to the customer is 2x of the prices above)
-- Market Psychology --
With ample supply of shirts, a reasonable buyer will almost certainly buy the best offering they can. They will obviously buy from the cheaper shop they can find, one of the many which have prices of $20 per shirt (2 * $10).
While prices are fixed, buyer habits are not constant. They will gradually exhaust the cheaper end of the supply. When 500 of the cheapest shirts are sold, the average price is calculated again. Now there are 500x10 + 500x11 + ... with a total of 1500 and an average price of $11.5833
Price before demand: $11.18, price after demand $11.58
Unsurprisingly, demand has caused prices to increase.
Of course this change is not linear. Shops which bought at $10 and have many sellers, will attempt to increase prices from strong demand and increase profits. Price increase will inevitably result in lower demand. The inevitable crash will follow. Demand has vanished and prices abruptly crash. This happens when all $10 shops reached the selling price of $11 ones. A rapid correction back down to $10 follows. A chart of Bitcoin is shown to demonstrate this oscillation.
-- End of the Road --
The exact same happens in periods of accumulation in the end of the cycle.
In the initial period of market cycles, prices have their lowest price, in the end the highest. (this is not always the case, but it is always the target)
When most shirts are sold, all shops are still working, most of them have supply in hand, and selling prices have reached $34 (2x$17). It is then when the most expensive of shops have their chance to make their target profit. Prices have gone so high and the new season is right around the corner.
We have reached a dilemma.
We cannot increase prices much higher because demand will not show up. If the most expensive of shops cannot reach their target price of $34, they will definitely have to make $17 per shirt to break-even. It is that pressure which makes sellers slowly and progressively reduce prices to find demand. A downward zig-zag is taking shape.
-- Conclusion --
This entire idea is by itself a conclusion. A tale of a fight between the unstoppable force of traders against the immovable object of assets. The chaos of capitalism simplified.
Everything should be made as simple as possible, but not simpler.
Tread lightly, for this is hallowed ground.
-Father Grigori
ノート
Proud to be marginalized.
トレード稼働中
The top comes when everyone wins.ノート
Most of us are trapped...
We could encourage constructive conversation about markets in general, without a definitive yes/no, buy/sell. There is no absolute answer in nature after all. It is all quantum.
Instead we all fall for the bull/bear trap. We want to translate all knowledge into profit and wealth.
If we had the Library of Alexandria today, we would sell it for "insider info".
Your investment is quantum. You have zero profit before you sell. Price changes don't reflect real profits. And so, sometimes yay-high is not high enough. You need wow-high. Too-high.
The average Dollar Strength is sitting in 97 points right now.
This chart, like all charts, has two meanings. Dollar is above average (good for sellers), but not high enough for bull exhaustion (good for buyers). It honestly looks like it has passed a hard obstacle.
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