Woody Dorsey Research: by Woody Dorsey.
What is a Black Hole?
A Black Hole is a defined time period when extreme market events may take place in a very short period of time. I invented this term based on 40 years of studying markets and psychology. It is an advance in the field of Behavioral Economics. It is beyond the scope of current Rational Market theory. In Efficient Markets it should never happen and there should be no way to anticipate such events…..but. Human Beings, Teenagers, Investors and Markets do freak out once in a while. We generally don’t like to talk about it. Human Nature is Market Nature and it isn’t always pretty. Black Holes are specific negative stock market patterns.
Keynes and the General Theory of Market Prana
The most interesting ideas may never be published. You can’t always google the real story. Maynard Keynes, the eponymous British economist, is not so well known for his suggestion that “Animal Spirits” lay at the core of all economic behavior. Why do Humans and Markets behave the way they do? It is the Energy. Follow the Money may really mean follow the Energy. The original term for Energy is Prana. It is the Market Energy or the Market Prana which influences Market buying and selling. I know you don’t know what I am talking about. It is not Rational but markets are not really Rational either. Certain Stock Market setups produce a specific Prana which induces a Black Hole. Okay this may really seem like a lot of inside baseball for most folks who assumed they were well aware of the rules of the game but that is where my research has taken me. The Psyche, the Animal Spirits, the Market Prana are the real prime movers of Markets. I invented the term Black Hole but the Energy already existed.
Some may surmise that my discovery of Black Holes proves market timing which in turn proves Behavioral Finance which in turn disproves Rational markets. You may be the judge. No one should have expected a rally from Xmas. I did. No one should have thought it might end near now. I did. No one should be able to expect the relative timing of any “risk off” episodes. I do. Market timing is far from an exact science. There are no absolute systems or waves. There may be principles. Sometimes there are indicants for those who listen over a long time. Maybe we need to ignore our ignorance and embrace our extant inner non-rational knowledge.
Goodbye Golden Halo
When the illusions are stripped away in the market or in the human being, reality becomes revealed. But usually not for very long. The psychological mask of composure is donned again quite quickly and everything is explained away. Ask any pundit to explain what has already happened in the market. The News Knows the Past (ask FOX) but not, the Future. Now, there are different orders of Black Holes and sometimes there is a series of them. The typical psychological sequence which I have discovered is for a period of bullish complacency (Golden Halo) to resolve into a Kill Zone set up which, when triggered resolves into a decline into a Black Hole.
Redaction’s Required until Kill Zone Trigger
When is the first Black Hole due? Sure I already know that. I have for some time. After all I invented the term and rediscovered the indicator. But until full access is permitted by Mr. Barr, it will have to remain redacted. People are overly Greedy. They Gossip. They Obsess. Human Beings are habitually abusive of information. Well, the Golden Halo is over for sure but while the Kill Zone trigger is fingered, it has not been pressed. It requires an acute market release which may happen relatively soon. I will provide a schematic of that market situation to the faithful in due time. Meanwhile all you need to really know is that it is looming. There are multiple Black Holes coming. Keep it Simple. Most importantly and first off, don’t be going all in on the long side. You know what you need to know.
Black Swans are Easy
One of the most notable Black Holes which I, and some of you, witnessed, was in October of 1987. History never repeats but it always informs. The key point is that 10/19/87 was an extreme Black Hole and it not last very long at all. So never expect the media, or anyone, to explain what is happening in any timely or useful manner. A Black Hole may be anticipated and it happens pretty fast. Don’t be confused by the concept of a Black Swan. That is a market metaphor for a surprising event which may alter existing economic paradigms at some point in time. In short, Black Swans are the province of market philosophers who surmise that unexpectedly bad things are indeed going to happen sometime. Indeed they do but it may take years or even decades. Black Swan events belong in the realm of “Big Picture” thinking which is not necessarily useful and may even be deleterious to active market participants. Black Hole phenomena on the contrary are never subtle and are very timely. They may be compound events, as this one appears to be. Again the Black Swan preposition speaks to something that might happen sometime. A Black Hole has specific timing. If this one does not manifest, so be it. This Black Hole probability will not happen next year instead. It has a defined shelf life. It is not a philosophical theory.
Forecasting the Future is incredibly popular but it is never easy. Still, Everybody does it. Everyone has an opinion about what their version of the future may be. We all accept the Present as Reality. Rightly so. However the Present is always changing into something else which we did not quite anticipate. But the Future is always different than now, most often in different ways than we expect. Everything that hasn’t happened yet always seems unrealistic. Yet we all make dangerous assumptions about the Future. Investors, are dominated by their belief systems. They believe but they do not know. Be aware that the Future can come up pretty quickly.
Black Holes are Beautiful
Black Holes expose the reality of the Psyche. That is healthy. Market and Human Rationality becomes revealed as unreal. When markets freak out, the “weak hands” get out of their longs. Thus a Black Hole provides some degree of a buying opportunity. So that is a good thing. If you want to play the game of just being a long term equity bull, you will outperform by simply becoming ultra-defensive for very short periods of time. But buy every big break no matter what the News is saying. Black Holes are Beautiful. A lesser understood feature of this phenomenon is that equities are not the only asset which may have a big move during a Black Hole. Look for potentially big moves in several markets. The amazing upshot of the 1987 stock market Low was that it provided the best Bond Market rally in history. Remember that? That was fun. Thus, several outside market opportunities may be looming. Yes, there is often collusion among indices. What exactly is going to happen with all of the related markets? I don’t know but nobody else does either. But at least I know it is about to happen. So, be prepared for anything in related markets when stocks correct. Enjoy Market Reality if you are listening. Markets are not Rational. A word to the wise is sufficient: Black Holes are Looming. Get Tuned. Stay Tuned. This is not the End of the World. Maybe Nothing will happen? Oh, it will happen. Who remembers 1987 anyway? There are no questions? Thank you, Woody Dorsey
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Information is for paid customers and may not be copied or distributed Copyright 2019