Copyright © 1999 C. J. Lofting
This site, as well as its companion site, deals with the source of meaning, how we humans determine meaning. We can trace this back to our neurology where information is categorised into objects (what) and relationships (where). Further investigation has led us to the discovery that we seem to apply this general dichotomy, the what/where dichotomy, recursively such that the basic elements of the dichotomy are combined to give more complex meanings.
At the neurological level these meanings are in the form of patterns of emotion, thus all objects, or all perceptions of objects, comes with a fundamental feeling that is common through all expressions of an object; thus a 'whole' is a 'whole' regardless of the millions of possible words that are used to identify it.
To give these patterns more specific meanings we develop a particular context, a discipline, to which we add a lexicon where the lexicon is the set of all words used by the discipline to describe the what/where interactions. Thus, since we use the discipline to describe what/where so the discipline serves as a metaphor and as such enables us to flesh-out our descriptions and this includes particularising these descriptions to 'fit' the context; we create 'novel' words that go towards giving the discipline an identity and so a sense of 'uniqueness'.
The price we pay for this is that the increased sense of precision that this metaphorcation achieves leads us to take the metaphors literally. However, careful scrutiny of these metaphors easily brings-out the 'basic' what/where interactions that are behind these metaphors and serve as the fundamental elements for communicating meaning.
In the stock market we use two basics methods of analysis to generate meaning : technical analysis and fundamental analysis.
Technical analysis deals with the 'where', usually expressed in 'wheres' derivatives the 'when' and the 'how'; technical analysis is used to determine 'when' to trade. It will also tell you 'where' in that analysis of the different instruments used in trading can point to a particular instrument that would be better to trade. (instruments are equities, bills & bonds, futures, options etc). Technical analysis emphasises relationships and what is behind them, it deals with determining algorithms and formulas that can be used to detect a particular 'expression' of a share i.e. its price and a particular moment or range of moments and so an emphasis on 'how'.
Fundamental analysis deals with the 'what', usually expressed in 'whats' derivatives the 'which' and the 'who'. Fundamental analysis looks at objects in the form of companies, it studies properties of the company and how the company expresses itself, fundamental analysis thus ignores all external context and only looks at the 'robustness' of the company as an entity in itself, it looks at the balance sheet, psychology of the directors, and of course the profit/loss reports. All of these define a company at any one moment in time as a self-contained form ready for 'battle' in the market. Fundamental analysis emphasises objects in the form of companies and their representative -- shares. In a sense fundamental analysis is a sort of medical checkup with the aim of ensuring that the company/share in its 'pure' from is 'fit' for duty.
From this brief analysis we can see the fundamental neurological processes, manipulation of the what/where dichotomy, at work in one of the most dynamic and at times abstract disciplines used in society and across all cultures within the species, the discipline concerned with financial markets.
What is of interest is that behind all of the words used in these various disciplines there is an invarient pattern of meaning used by ALL disciplines that use dichotomies as fundamentals. It is this template that acts to encode all words with a sense of meaning, something we 'feel', and as such even enables us to make analogies across disciplines since it is the invarient patterns of emotion that resonate with meaning rather than any words.
Furthermore, since the market forces emphasise the use of profit/loss, long/short, put/call, bear/bull dichotomies etc etc so patterns we see in the market are in fact patterns found in the template; For example, wave patterns observed in market processes can be traced back to (a) recursive dichotomisations combined with (b) indeterminant states and (c) different degrees of feedback considerations. Thus all possible expressions are 'known' and we need to find the current 'flavour of the month'.
As we have demonstrated elsewhere, the template can be used to show us the source of mathematics and so any discipline that utilises the template will 'resonate' with a mathematical description in that each discipline serves as a metaphor to describe fundamental what/where interactions and as such each discipline can be expressed in terms of any other.
For example, technical analysis is strongly tied to concepts that utilise irrational and imaginary numbers whereas fundamental analysis is closer to concepts thst utilise whole and rational numbers. This being the case, technical analysis would benefit more from a wave approach when compared to fundamental analysis which is closer to a particle approach.
In the next section we will analyse closer some of the characteristics of these dichotomy-based disciplines and how they can br used for prediction purposes.