When Patterns Fail

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It should go without saying that I like patterns. I see them everywhere: not just in charts, but in physical objects, human behavior, and events in my life. There’s even a term for it – apophenia – which isn’t necessarily a laudatory title. It can suggest seeing patterns where there really aren’t any.

As the proprietor of this little corner of the web, I try to do a good job showing patterns that I see, but there are certainly times when a given pattern – – even a remarkably good one – – can “go sideways“, as the expression goes. That is to say, it starts to do what it shouldn’t do, and it ruins the pattern. Here are a few examples from some long-term continuous futures contracts that I just thumbed through, and I’ve marked or highlighted the areas where things went bad.

I don’t think these failures illustrate how useless patterns are, because I specifically focused on examples in which the pattern didn’t work out. I think the important thing is to recognize, as promptly as possible, when the pattern is misbehaving so badly that it has been rendered meaningless. One should just hang on, hoping that the pattern will realize the error of its ways and rectify the situation. These things aren’t sentient. They are simply expressions of collective human decision-making.

Still, it would be awfully nice if high-quality patterns were utterly reliable. Since they aren’t, in the back of my mind, I’m always worried that a fantastic long-term setup like this………

…..will eventually just ignore its destiny and pull something like this: