Reading a Market Assessment
Market State describes the condition. The Intelligence Score describes how strongly. They answer different questions.
10 min read · beginner · lesson 2 of 5
What this covers
- Read the five market states
- Separate the state from the score
- Decide what each state warrants in practice
- Explain why a high score is not a recommendation
- Recognise the common misreadings of each
The five market states
- Directional, bullish
- The market is making progress upward and the evidence supports continuation.
- Directional, bearish
- The same downward.
- Transitional, bullish tilt
- The market is between conditions, with an upward tilt in the evidence. Weaker than directional.
- Transitional, bearish tilt
- The same downward.
- Balanced
- No directional edge in the current evidence. The common state, and a legitimate answer.
State and score answer different questions
The state answers what. The Intelligence Score, on a 0 to 100 scale, answers how strongly the evidence supports it.
The two move independently and both readings are needed. A directional state with a low score describes a market moving in a direction the evidence supports weakly. A balanced state with a high score describes a market with no directional edge and strong agreement about that.
Reading only the state produces a direction with no sense of how much to trust it. Reading only the score produces a strength number with no idea what it is the strength of.
What each state warrants
| State | The reasonable response |
|---|---|
| Directional, high score | Worth work. Find the level, the invalidation and the size. Still not an instruction. |
| Directional, low score | Watch. The direction is there and the support for it is thin. Wait for the score to firm or leave it. |
| Transitional, either tilt | Wait. The condition itself is unsettled, and methods that work in settled conditions are the ones that fail here. |
| Balanced, high score | Remove it from the list with confidence. This is the reading doing useful work. |
| Balanced, low score | Remove it and check back later. Neither the direction nor the absence of one is well supported. |
Transitional is not weak directional
A transitional state describes a market between conditions, and the methods that work in a settled condition are the ones that fail during a change.
Treating it as a directional state with a smaller position keeps the wrong method and reduces the size. The state is a statement that the condition itself is unsettled, which is a reason to wait for it to settle rather than to participate at reduced conviction.
Balanced is an answer
Balanced appears frequently, and that is a property of markets rather than a gap in the reading. Markets spend most of their time without a directional edge.
A platform that produced a directional call on every instrument every session would be manufacturing signal from noise. Balanced is the reading saying there is nothing here, which has real value: it removes instruments from consideration and narrows attention to the few with an actual condition.
A session in which most of the coverage reads balanced is not a failure of the platform or a waste of a subscription. It is an accurate description of a quiet market, and the correct response to it is usually no position.
Reading two assessments
IllustrativeBoth examples are illustrative.
Instrument A: directional bullish, score 84. A market making upward progress with strong evidence agreement. Worth attention. Still requires an entry level, an invalidation level and a size before it becomes a position.
Instrument B: transitional bearish tilt, score 41. A market between conditions with a weak downward tilt. The honest response is to leave it alone until the condition settles.
Neither is an instruction. A is a candidate for work, B is a candidate for the ignore list.
Note what the score does not say about A. It does not say the move has room left, that the entry is here, or that A is a better use of capital than something else on the list. Those are all still yours to establish.
Key takeaways
- State answers what the market is doing. Score answers how strongly the evidence supports it.
- Read both. Either alone is incomplete.
- Transitional means the condition is unsettled, not that a directional read is weak.
- Balanced is a legitimate reading, appears often, and usually warrants no position.
- A high score identifies a candidate for work, not an entry.
Common mistakes
- Ranking instruments by score alone without reading the state beside it.
- Treating a transitional state as a directional one at smaller size.
- Reading balanced as a failure of the analysis rather than a description of the market.
- Treating a high score as evidence that the move has room left.
Knowledge check
OptionalRelated
- Understanding confidenceUsing PecuDesk
- Reading the Desk NoteUsing PecuDesk