Apophenia: In psychology, the perception of connections and meaningfulness in unrelated things. Apophenia can be a normal phenomenon or an abnormal one, as in paranoid schizophrenia when the patient sees ominous patterns where there are none, see ZeroHedge.From The Big Picture:
Yesterday morning, we learned of Rupert Murdoch’s bid for Time Warner for as much as $85 dollar a share, or more than $75 billion. Soon after, the annotated chart below showing the Standard & Poor’s 500 Index began circulating on trading desks and websites, suggesting Murdoch’s offer signaled a market top.
It is such a misleading piece of statistical tripe that it cried out for a rebuttal. It is a prime example of confirmation bias writ large, another in a long line of weak analyses, wishful thinking and intellectual laziness that pollutes the Web....MORE
There are numerous ways to debunk this bilge water, but for brevity’s sake, I will limit my wrath to a few quick lines of attack: Cherry picking, bad correlations, small data set, and randomness....
We last looked at the phenomena in "Generating Alpha Through Intermarket Analysis":
If you are going to do global macro, intermarket analysis is pretty much a given.See also:
At the same time you have to be on guard against apophenia, seeing connections where none exist. Unless such things make you smile. First up, Psychology Today:
Being Amused by Apophenia...
Image of the Holy Cross Miraculously Appears Inside a Potato Claims Chef
and "Scientists say 'don't worry, it's normal to see Jesus on a slice of toast'"
