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Fundamental Interaction

There are times when the price movement as governed by the cycles that are evident becomes distorted, often for a brief period of time. These occasions often occur when a news item, or some other fundamental (as opposed to technical or cyclical) event causes a temporary panic or elation amongst the market participants. This has the effect of a sudden price move which might not fit into the cyclic picture, and is always followed by price "bouncing back" into the cyclic mould. Hurst called these occasions "moments of fundamental interaction".

Most of the time moments of fundamental interaction actually occur as an exaggeration of the current cyclic picture, such as this fundamental interaction which occurred on 16 March 2011, as the news that a tsunami had struck Japan broke:

 

The cyclic picture at the time was for prices to fall into a long-term trough of the 20-week cycle - the fundamental interaction merely exaggerated the cyclic picture.

Here is an example of fundamental interaction which didn't fit perfectly into the cyclic picture. The EURO / US Dollar pair formed a trough on Tuesday 12 July 2011 amidst news of the Greek crisis (EU calls new meeting on Greece as Italy clamps down on stockmarket speculators - Riva Froymovich - The Wall Street Journal - 11th July 2011). Sentient Trader does allow for some degree of fundamental interaction as can be seen here, where the 80-day cycle trough has been placed a week later, on 18 July 2011.

 

It is very rare that fundamental interaction causes a move that it totally unexpected. The reason for this is that fundamental events serve to exaggerate and heighten the emotions of market players, not complete reverse their emotions.

Moments of fundamental interaction sometimes show on an analyzed chart as inverted Sentient wave shapes, which are an indication of an unresolvable situation in the analysis.

The Academy

The Sentient Trader User Manual is being completely rehauled. The new User Manual will be available in the near future. For the time being, please refer to The Academy for information pertaining to this topic, and check back here shortly.

To truly understand Hurst's Cyclic Theory there is no question that you should study the original material. While the book The Profit Magic Of Stock Transaction Timing is a good starting point, you will want to work through the JM Hurst's Cycles Course for a full understanding.


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