As you may now understand it, the market may be moving en masse,
and this pattern has been greatly amplified by the advent of the Internet
and fast communications. However, I will show you that many market
movements are started at a much lower level and that the broad
price trend changes are often triggered by only a fraction of the volume
exchanged.
Figure 1.1 shows the analogy between the stock market evolutions and
the evolutions of an organism. An organism that is in a state of equilibrium
first needs to be put out of equilibrium by an external trigger. This external
trigger is strong enough to generate a micro change. If this trigger repeats
itself for a period of time, it can propagate the change to the whole organism,
which will then enter into a new state of equilibrium.
I am not saying that we have to forget traditional technical analysis,
but rather that traditional technical analysis is less and less adapted to fastmoving
markets where information and manipulations are the basis of the
market movements.