When “Apple Computer” initiated the computer revolution with the Apple II, I was quick to realize that its use could probe the very foundation of supply demand type trading. Using just the closing , high, and low prices with the daily volume was the only real basis for a new mathematical model.
Merrill Lynch data sheets had made a beginning by showing that closing price times volume could produce numbers for momentum comparisons of stocks.
One of the best criticisms of the current “Handy Market Theory” is that the ideas are not well-connected, and that there is some confusion in the specifics. Briefly, the theory developed along these lines:
Price times volume equals a number for momentum…that idea relates to the physical world…the large world has absolute Newtonian, linear prediction…the micro world chance prediction of small particles…together science reaped spectacular success by the use of each kind of prediction.
The clear jump in reasoning at this point was that best market price prediction was following these two leads already highly successful in the physical sciences, such as Newtonian Mechanics and the Heisenberg principle of uncertainty governing the world of small particles.
A further clear jump in reasoning for a new market theory was that employing both techniques together could combine the best causation known for both macro and micro worlds. In fact, the chance happenings in the less predictable world of small particles used the same standard deviation theory central to the subject of statistics.
That meant that all market stocks and indexes would be subject to comparisons on the standard “normal curve,” while the deterministic, linear prediction would lead to excellent prediction in the markets,, tempered by chance.
I hope this connects the dots and ideas better, clearing up some of the jumps in reasoning leading to success of the current “Handy Market Theory.”
Herb Handy…author of the “Handy Market Theory”
