B.  TIME POTENCY. Time conditions the potency and effect of price swings (see the 1 st Law of Trend Dynamics). Rallies or declines below equilibrium should be transient spikes. If the amount of time (volume) below an inflection points reaches a specific critical mass, the character of a market can change and a trading range can give way to a new trend.

Below, in the weekly GBPUSD chart, after price reached a critical threshold of time below the Jan-to-Feb 2005 bottom a new down trend emerged.

C. REALIZED EVENTS. Frequently, what is NOT happening, has more information content than what IS happening. For example, the inability of price to rally stimulated by bullish news is often a reliable indication of incipient weakness. The element of surprise and high information value are correlated.

In the Crude Oil chart below, we can see the daily price action as Hurricane Katrina and Rita hit the Gulf Coast in 2005. Price was bid up as these hurricanes developed, but as they became realized events, what was not happening was the inability to extend up and hold support. This inability to rally further had more information value than what was happening and price soon entered an extensive down trend.

D.  RADIAN: Market character is revealed by tightness or looseness. A market's radian, as defined here, is an assessment of relative rates of change or units of angular velocity compared over different intervals of time. Tight markets exhibit small rates of change in short intervals of time compared to longer intervals timeframes.

In the weekly OIH chart below, the periods to the right of the up arrows are starting to show incremental or small rates of change from week-to-week than the rate of change developing from month-to-month (end of May to end of June 2005). Tight markets tend to be trending markets or at least lead to extensions of trends.

A market with a loose radian exhibits larger rates of change in short timeframes compared to longer timeframes. Loose markets are often mean-reverting and tend to be reversing trading range markets.

In the weekly 30-year Bond chart below, a one-month rate of change (as measured from early August to late August 2005) is greater than the two- and three-month rates of change (as measure from early July or early June to late August). Loose markets tend to be reversing or mean-reverting markets.

E.  FLOW: Market character is also revealed in the interaction of price with support and resistance. In the presence of a buy-side order flow imbalance lower timeframe support dominates higher timeframe resistance; likewise when a sell-side order flow imbalance is present lower timeframe resistance dominates higher timeframe support.

We can see this principle illustrated in the 30-year Bond weekly chart below. On the left side of the chart, a buy-side order flow imbalance was in effect and despite the clear overhead resistance, it was more profitable to emphasize lower timeframe support over higher timeframe resistance.

On the right side of the chart, below, a sell-side order flow imbalance was in effect and despite the clear support underneath the market, it was more profitable to emphasize lower timeframe resistance over higher timeframe support.