So Unpredictable

The stock market is full of repeating patterns. Looking at past stock and index prices it is easy to find these patterns. Despite this, it is almost impossible to recognize these patterns as they happen. John Mauldin wrote an article with an interesting The Subprime Virus take on how we tend to adjust our predictions over time. But we don’t include these adjustments in our risk assessment. We can predict a minor down turn. But if there is a major up swing first we are wrong. But when the down swing happens next we feel we are correct. For example the Shanghai Composite has formed a pattern that looks like a volcano. The two outer peaks are the rim of the volcano and the central peak is the dome. If it continues to form a volcano pattern it needs to plunge in value so it can form the right down slope. But it could easily go up and form some other pattern.