About the model

Living systems are always either expanding or contracting. During this oscillation, there are pre-determined points of structural change. Quantitative rhythms therefore  integrate with qualitative evolution.

Structural change is a reflection of learning. Learning has a three-wave pattern: an ‘information shock’, the absorption of the information, and the application of new learning. Hence, after a low, stock markets experience three phases: a bear squeeze, a re-test of the low, and a bull impulse wave. The reverse occurs after a top. Bulls and bears are driven by ‘learnt’ behaviour.

After an information shock has been absorbed, and a trend has been initiated, there are mathematical limits on retracements. While these limits hold, the trend remains in force. However, a penetration of these limits is prima facie evidence that background fundamentals are changing and that a genuine reversal is already underway.  

A trend reversal gestates in excess. The inevitable reaction is an 'energy gap' in the system's vibration and can itself be an information shock that starts a process of deep-seated readjustment.

Polarity reversal