Monday Opening 50 means there is no way on earth to foretell what the exact opening price of a stock or any security will be before it opens. The probability is 50/50 you will make a profit or a loss.
We build systems which we think may tell us that at some point in future time that a purchase we make today will be worth more then than it is worth now. There is a paradox here. We don't know Monday's advantage or disadvantage, but think we know next month's advantage. Neat. How do we get from ignorance to knowingness?
The answer lies in the 'Short term level' line in the chart above. Modern portfolio theory (MPT) tells you that all market trades are random. I believe they are. Another premise of MPT tells you that each trade price contains all that is known or knowable about the stock or security being traded. Therein lies the basis of a related paradox. If it is random it is worthless, hence the 50-50 opening uncertainty. If it contains everything that is known or knowable, it is immensely valuable. How can we harness the value within the uncertainty of the randomness?
The clue is in the short-term-level line itself. Several sections of the track do not tell us clearly whether the curve is above or below 50 (the mean--the buy and sell level).
If we expand the curve to a more molecular (greatly enlarged) level, we can see clearly the curve's changing relationship to the mean. Click anywhere on the chart.
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