But don’t be fooled by the radio
The TV or the magazines
They show you photographs of how your life should be
But they’re just someone else’s fantasy

- “The Grand Illusion” (Dennis DeYoung)

Now that Halloween has passed in the United States, it seems appropriate to reexamine the continual battle of perception versus reality as portrayed in Styx’s landmark album. Running the gamut from inspirational anthems to somber ballads, the songs reminds us of our childish innocence, adulthood struggles, but most importantly offers hope for the future. At the same time, it warns us of the forces which attempt to both control and guide our lives. Interesting similarities have even been drawn between the song ‘Castle Walls’ and the film sound track in John Carpenter’s seminal horror film ‘Halloween’. Is it any coincidence that in Greek mythology the ‘River Styx‘ formed the boundary between Earth and the Underworld? Perhaps we are witnessing a similar battle as America faces its divisive election next week. At the same time, it offers us the opportunity of rebirth and regeneration.

You’re probably asking yourself what this has to do with trading or the markets. A lot, in particular if you believe in Elliott Wave Theory. Astute traders will look for trend changes (valleys or peaks in popularity) as evidenced by signals in the media. The first time I had the opportunity to really put this into practice came in the 2001 decline. When popular consensus becomes so strong that it results in front page news or magazine covers, astute observers will instead consider this a signal that a massive trend change is about to occur. This happens both at market tops and market bottoms. On March 22, 2001, several magazines (Newsweek, USNews, and Time) all prominently featured a bear cover right as the markets completed a wave 5 lower impulse. The intermediate term trend was dead, although the worst of the recession and decline was far from over, it produced a very tradeable rally.

Another example is the recent housing crisis. The real clincher was on February 19, 2007 when Fortune Magazine begged the question “What’s your House Really Worth?“. A picture of multi-million dollar waterfront homes was proudly displayed and encouraging the public to flock to zillow.com and play voyeur on everyone else’s real estate holdings. In terms of the current market juncture, isn’t it poetic that Barron’s magazine release on October 27, 2008 featured a bear with chainsaw? At my local supermarket, stacks sat on the shelves as nobody dared to pick up and buy this reality check. Markets have since rebounded from 15-20% in a period of five days. Big thumbs up for the market and next week’s edition – that last one was our Halloween edition, right?

Not that there’s too much in a name, but my favorite Australian rock bank ‘Rogue Traders‘ announced that they officially dissolved on June 25, 2008. At almost the same precise time, the Aussie dollar took a plunge from precipitous heights as risk-averse investors pulled funds from Down Under ten times faster than they had done for past seven years. ‘Voodoo Child’ started their careers (sampled from Elvis Costello’s ‘Pump it Up’), and was even featured prominently in the 2007 “Dr. Who” episode during the climatic final scene as cannisters are dropped and the Master sets his plan into motion. Often I have wondered just how much ‘Way To Go’ expresses a commentary on the modern foreign exchange traders and lyrics inspired by the likes of CNBC. Although the songs chronicled the stormy relationship between lead singer Natalie Bassingthwaighte and band member Cameron McGlinchey, it also reflected investors love and hate relationship with the Aussie dollar, and traders will find truisms peppered throughout their lyrics. Never mind this is where most of the carry trade money congregated earning 7.5% interest while shorting the yen.