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Triunity Theory

Mood – The Psychologicals

Mind – The Fundamentals

Body – The Technicals


“Everything I have experienced suggests that, at core, economic conditions and markets are grounded in the human psyche.”

– Robert Rubin


 

 

Man is the Measure of All Markets.

Market Semiotics analyzes three different and distinct market components, corresponding to how participants feel, think and act. Each component has its own behavioral attributes and its own specific metric.

Woody Dorsey developed this method – known as Triunity Theory – over the last 20 years. But in 2003, he published it for the first time in his book Behavioral Trading: Methods for Measuring Investor Confidence, Expectations and Market Trends. The book defines the three market components as Psychologicals, Fundamentals and Technicals, or the market’s Mood, Mind and Body.

 

Components of Triunity Theory

In the same way that the fields of Macroeconomics and Microeconomics simply reflect different scales or cosmoses of activity, Triunity Theory proposes an equally obvious scalar relationship. Man, or the individual investor, is a microcosm of the market as a whole. That is, the rationalization, psychology and investing behavior of an individual investor is directly related to the thinking, feeling and acting of all investors. The aggregate of all investors is, of course, the market itself. Thus, the best guide to how markets function is man himself.

Thus, the market is an exact mirror of the structure of man, who has three distinct but interrelated brains. Mood, Mind and Body translate into the Psychologicals, Fundamentals and Technicals of the market. The implementation of Triunity Theory requires different metrics than those used by traditional economics. Market Semiotics uses metrics such as sentiment, slogans and price trends to diagnose the market.

 

Mood – The Psychologicals

Feeling bullish? To capture the mood of investors, Market Semiotics maintains a proprietary database of stock and bond sentiment, collected through daily polling from 100 listening posts. Each post effectively filters thousands of sentiment sources, including brokers, traders and the media. Yet sentiment data is useless without a proven interpretive framework. We’ve developed several models to determine the psychological phases of the market.

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Mind – The Fundamentals

It’s not the fundamental data that matters as much as what experts think about that data. Why is it that the fundamental facts of last week or last month, once promoted as so bullish, suddenly seem not so bullish? This confirms their fickle nature. Fundamentals are just the changing market stories perpetually spun by the presumed pundits. Our Memetics Model tracks these Transient Investment Themes as they evolve from the discovery phase to buzz status to compelling propaganda, and then on to becoming passé.

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Body – The Technicals

The physical manifestations of market behavior – such as volume and volatility – ultimately result in a price trend. Although prices rise and fall as investors move from bullish to bearish, the durations of price trends generally remain the same. They mirror the habitual attention spans of investors. We employ Trend Duration Analysis to determine where the market is, according to tactical and strategic time frames.

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