Woody Dorsey invented Triunity Theory™ to analyze the markets. Dorsey observes what investors think about the market, but he also tracks their two other cognitive components: the way they feel and the way that they act. Dorsey has used these methods for twenty years. He defines these three components as Psychologicals, Fundamentals and Technicals, or the market's Mood, Mind and Body.
Mood - The Psychologicals
Behavioral Trading has access to the proprietary Semiotics Sentiment database. This unique polling process captures the Mood of the market. Stock and bond sentiment are collected through daily polling from 100 listening posts. This effectively filters thousands of sources, including brokers, traders and the media. It's essential to use the same sentiment methods over a long period of time. But sentiment data alone is useless without a proven interpretive framework.
Mind - The Fundamentals
Fundamentals are the stories that investors exchange about the market. We have found that the most important study is to measure what the experts are thinking. Why is it that the fundamental facts of last week or last month, once promoted as so bullish, suddenly seem not so bullish? Fundamentals are just the changing market stories perpetually spun by the presumed pundits.
We have inverted market metrics such as Page-Grading and SloganSearches to measure the transient investment themes of the market. We have discovered a Semiotics Memetics Model, which shows all market ideas as they evolve in predictable phases from an initial discovery phase to a final propaganda phase.
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. Most importantly, this method allows us to estimate the length of trends without being fixated on any particular price projection. The market is always changing on the surface, but the durations of its trends generally remain the same. The length of price trends mirrors the habitual attention spans of investors.