(Stock Market) : System Force Vs Event Force

Before 13th May, 98, stock market has been generally on the downtrend after the sharp rebound from Composite Index of 569 to 764 in 5 days, (immediately following the Chinese New Year, Jan 26, 98). The undersigned is of the opinion that it is a good time to get ready for an opportunity to enter the market. On 13th May, 98, the Cyberspace friend wrote:

The Cyberspace Friend wrote:

From System Theory perspective, in this case Stock Market is the System Behaviour, there are two considerations: (Refer to Malaysian Market, which is fairly similar to Asian market)

• a) The collective action of the market, as reflected by the technical market trend, currently is on a downtrend.This means it is a Force to be reckoned with, not ignored.
• b) Every day, new event emerges and evolves, in this particular moment, it is the social unrest, etc.

Hence there are two forces are at play : Collective System Force and New Event Force. They simply intermingle, interact and inter-react with each other. At any moment of time, collective force dominates, until the new event (opposite) force builds up sufficient force to counteract the collective force.

In this particular case, the collective force also to some extend takes into consideration, the present events, as known to public through mass media etc.. but prior to this public knowledge, there are some "privileged people" or "good speculators" had taken the new "phenomena" into consideration and initiated earlier action e.g. "selling into the market" that makes up the present downward trend.

Just yesterday (13th May, 98), Malaysian Market has plunged from 764 to below 550 (which I have been waiting for as support), If the public perception remains pessimistic, gloomy, i.e. more unrest and problems, collective force (reinforced by the event force) may push the index down to support level of around 485. If not, market will rebound due to recent sharp fall.

This is similar to our discussion :

• History makes Man : Collective forces set the trends
• Man makes History : Daily emergent events help shape market movement.

Recognising the two forces at play, helps one to be more objective as market traders and players. Do you recall, some few months ago you express similar pessimistic and gloomy views of Asian market, thinking that it is almost the end of the world, something like possible war in Iraq (dispute over inspection of biological weapons) etc. etc. Looking back, and looking at present situation, "personal perception or opinions, mostly sentiments" only represents a part of the total market force, i.e.. the events force, which can be subjective and misleading. The greater System force is still the operative active field.

Hence in the above case, I am patiently waiting to enter the market at the correct timing (i.e. importance of timing) e.g. to catch the rebound (for some quick gain) or check whither it will slide further down to Composite Index 485. i.e. my mood is NOT affected by daily events or upheaval, but I do pay greater attention also to the System forces and check whether Event Forces have gathered sufficient momentum to further reinforce or counteract the System Forces.

From the Cyberspace Friend:

Note: This author is still learning, not really "experienced", trying to appreciate and "feel" both the System Force and Event Force, seeking for opportunity at right timing, after delicate balancing of the two forces at play.

The above observation of the stock market behaviour rings a bell with that of organisation behaviour, more prominently exhibited by upper management. Often times, the management is either reacting to events, try to create new events, but not fully aware or appreciate the actual system forces (both internal and external) : cumulative and collective outcome of past management action, which truly represent Current Reality and Direction..

End.