The sound of one hand clapping

"Faced with the choice between changing one's mind and proving that there is no need to do so, almost everyone gets busy on the proof."

- JK Galbraith

In times of sentiment shifts in the market I like to draw a parallel from the I Ching. Each trigram is made up of 3 lines which are either Yin or Yang lines. Each line in turn can have an old and a young line implying it is tending towards its opposite (i.e Yin line to Yang line or visa verse).

These old or young lines are the most important in terms of the interpretation of the final resulting Hexagram.

The great thing about this kind of observation is this is something that one can observe time and again in everything; just as love breaks down into hate or liberalism shifts into fascism or drunken confidence descends into a paranoid hangover.

Yin and Yang is a pretty simply concept well illustrated by Wikipedia;

“Yin yang are not opposing forces, but complementary opposites that interact within a greater whole, as part of a dynamic system. Everything has both yin and yang aspects as light cannot exist without darkness and vice-versa, but either of these aspects may manifest more strongly in particular objects, and may ebb or flow over time.

Many natural dualities—e.g. dark and light, female and male, low and high, cold and hot, water and fire, air and earth— are thought of as manifestations of yin and yang.”

To this I might add “bullishness and bearishness.”

It is important that within the Yin and Yang in each side of the symbol there is the element of each other represented by the eye. Each impulse holds the seed of its own transmutation into the opposite impulse.

This really explains much of the turn in risk assets in January.

Structurally things remain the same but our attitude toward them adjusts and evolves. Right now things feel really rather ambivalent. Ignore the events but watch the reaction to them. A Greek default may now be irrelevant simply because the attitude of people to such a default is no longer one of fear. The Germans appear instead to be tired and the Greek leaders resigned. A default looks imminent but I am not sure anybody really cares anymore.


This is why when sentiment in the market is so blindingly negative or positive one is always entering a turning point in that sentiment. As soon as a given market view solidifies into a consensus, as soon as every broker reads the same or as soon as the market crunch or high has made it into the everyday pleb press you know that the environment itself has reached its zenith and is now tending toward its opposite.