The Market as a Traffic Jam, 03/21/08
Suppose we limit our view of driving a car to speeding up, slowing down and the yo-yo-like oscillations of driving in traffic.
Suppose our view of the market is made up of three things: support, resistance and a global oscillator.
Now imagine a traffic jam: cars slow down, cars speed up, cars slow down, cars speed up...
Now imagine the market as a traffic jam:
Every time the fundamentals change, the cars speed up or slow down.And wonderfully, the metaphor is doubly circular: it appears that traffic is mean reverting.
Every time the cars speed up or slow down, the oscillator frequency changes.
Every time the oscillator frequency changes, support and resistance move.
Every time support and resistance move, the cars speed up or slow down.