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Scenes From The Market: Digital Storm-Chasing


Earlier today, the Japanese Prime Minister Yoshihiko Noda, said he would dissolve the Diet (lower house of Japanese Parliament) this Friday;  paving the way for a general election as early as 16 December.

This election could potentially lead to Japan's 7th change of Prime Minister since 2000 and the foreign exchange markets didn't like it one little bit so traders from Boston, Mass to Boston, Lincs.  dumped the yen in serious numbers.

And there it was; just another mundane example of the butterfly effect in full effect. That little flurry was only one of the tiny flutters and palpitations that make up the pulse of the market today and every day.  

As a wire service reporter in this environment,  I have been learning an esoteric new language; one where Fibonacci retracements and doji candlesticks are sought in the graphs of 18th century Japanese rice traders.

The foreign exchange market is often described by über capitalist types as the purest embodiment of the efficient market in action. They might be right (if you go in for perfection in your expressions of haute capitalisme, that is).

To my untutored eye however, this market is more like a weather system and when you spend enough time poring over candlestick graphs looking for 'Elliot Waves' and 'Ichimoku Clouds', you might as well be analysing meteorological data.

In much the same way that weather systems are governed by certain immutable truths (commonly known as the laws of physics) , this market is governed by the certainties of supply and demand.

But then, just as there are multitudinous meteorological variables that make the difference between fog on the Thames or fog on the Tyne,  so it is with the markets. 

The announcement of yet another election in Japan can cause the currency to depreciate dramatically (at least in the short term), yet falling industrial production and industrial unrest in half of Europe did little to stop the euro recovering today  just because some German politician hinted that Greece would be weighed in with a €44bn dose of medicine. It's not always possible to tell where the lightning will strike.

On one level as a reporter, there's something deeply clinical about it all: you wait for the release of data or a geopolitical event occurs or even a natural disaster and then, like some kind lab technician who has just administered his subject with an injection of an experimental substance, you monitor the subject, checking his vital signs; poring over the graphs that show the market's reaction to a hurricane or a balanced budget.  

Then on a good day (one where volatility is high and news feed plentiful), it's like digital storm-chasing; searching for that remorseless vortex at the centre of the storm as it moves across the vast electronic topography. It's binary, impersonal; as random and ordered as the  path of a plague of locusts or a murmuration of starlings.




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