Can we really predict the market prices? (oscillator model)

cyberwolf(49)

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Recent market movements have proven that even an experienced traders can make significant mistakes in their forecasts. It's always funny to read tweets like "Buy the dips" and two days later see the market going much deeper. So the question is: is it possible to predict with confidence the further movements of the market?

And I think in general the answer is No. The reason is that market is moving on the basis of our shared emotional state. It's like an system of nodes connected through social channels and oscillating together. This model (multiple spring oscillation) is very simple, but works pretty well. Green node means a person who is positive about future and red is otherwise.

Bull market looks like this (when people overconfident):

When market is crashing:

Look at these fast red nodes - nice to meet you, weak hands! Funny thing, because of the bug sometimes they break their links and fly out of the screen, often by the whole groups - just like in life. Slow green guys obviously are a long-hodlers. In real life many factors can influence whether a node becomes green or red: the weight (amount of money), count and strength of its social links, maturity.

After this chaotic state the oscillator gradually calms down.

So, as you can see the system is not deterministic, therefore its further state can not be predicted. Plus, big events come into play. According to "Black Swan" theory there will always be an unpredictable events that can suddenly change the market, sending prices in an opposite direction.

So black swans can be devided into two categories: pump swans and dump swans.

Let me make a short list of possible birds: