06 July 2010

Causality Structures

There were the 3 tests on 4 hour EUR/USD followed by the decisive move ! Thus there is a correspondence between 1 min and 4 hour, how exciting. On the 1 min chart that is one of the most reliable tradable structures I saw.

It is hitting the first of the candle bodies in the long chain on valuation spikes in 1 month, those spikes are causing resistance again, another thing to think about is the rise today was from equities, not the forex market itself.

Remember I said a rise on Euro tends to be followed by a stock rise. After the crisis this was especially true, but it has got less and less true, but it still holds to an extent.

What this means is perhaps the risk on/risk off, but probably more a reflection of Euro's role as a pipeline through dollar assets, in some senses, modulated by debt. The way money flows means a counter intuitive correspondence between a rise in Euro and a rise on dollar assets in the form of equities.

How ? It is the pipe, which is not a 3 dimensional structure really, but multi dimensional, i.e. highly complex (this is the computational structure, well suited to multi-dimensional information, I detect in the forex market which contains the obvious long memory of the forex, which other tests say does not exist - those memory structures look computational to me, they are so precise). Multi-dimensional here does not mean time warps etc. it is a way of modeling highly complex interrelated causality structures.

This relationship was closer to being linear than usual in the crisis for the reasons I gave, but it has now become much less. Even in the crisis though it was not linear as I said it was that plunge now and then, which it still is. I know these are complex ideas for a blog, but the forex market is a highly complex environment it is why most lose money there.

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