The formations and movements of the clusters is the pattern recognition that ultimately matters. It’s referred to as momentum by some, strategy by others, depending on one’s technical or fundamental bias. In the first case, the criss-cross lines of history are extended out, subjectively, until it’s noticed that the line is broken. In the second case, the exercise is in principle the same, but with a more attentive look at underlying drivers and a proactive push. No matter, the clusters form and move, and thus the markets.
The “markets” in the aggregate are the network graph manifestation. Equities are just one part, with debt and all the other asset classes, and all the non-financial forms, such as the shopping mall and Amazon dot com, which in turn tie to supply and value chains back to financial categories.
The economy is reflected in markets, they say, and the reverse is also true. Underneath it all, the clusters grow or shrink or change their shape and nature of their links to other clusters that are very rarely static. The change has its effect in ways that aren’t easy to predict, because the system is multivariate and dynamic.
Nevertheless, it is inherent in our nature (and important) that we try. A bubble only happens if and when it pops. And sometimes even then, it bounces back. It isn’t final, though possibly transformed to something else. That is the pattern, that is progress.