Quick Guide
Key concepts for market structure intelligence
Quick Guide
Key concepts to help you interpret the market network
What is this tool?
Market Structure Intelligence is like a weather radar for financial markets. It doesn't tell you what to buy or sell - it shows you how different parts of the market are connected and influencing each other right now.
- See leadership patterns - who's driving the market
- Spot regime shifts - when dynamics are changing
- Understand connections - how assets influence each other
Leader vs Follower
Assets that drive market moves vs those that react to them.
In market structure analysis, a Leader is an asset whose price movements tend to precede and influence other assets. A Follower is an asset that tends to move after and in response to leaders.
This isn't about being "better" or "worse" - it's about understanding information flow. Some assets process new information faster or are more central to market dynamics.
For example, during a risk-off event, Treasury bonds (TLT) might lead by moving first, with equities following. During growth optimism, tech stocks might lead and defensive sectors follow.
The leader/follower relationship can change over time as market regimes shift.
If SPY consistently moves 1-2 days before IWM in the same direction, SPY is "leading" small caps.
Lead-Lag Relationship
When one asset consistently moves before another.
Macro Nodes
Assets representing broad economic forces.
Leadership Temperature
Measures how concentrated market leadership is.
Leadership Temperature (0-100) tells you whether market influence is spread across many assets or concentrated in a few.
Low (0-30) - Fragmented: Leadership is dispersed. No clear direction. Markets may be choppy or in transition.
Medium (30-50) - Balanced: Healthy distribution of influence. Multiple assets share leadership. Normal market conditions.
High (50-70) - Concentrated: A few assets are dominating. Clear themes emerging. Often seen in trending markets.
Extreme (70-100): Very few assets control market direction. Can precede major moves or reversals.
Think of it like weather: low temperature = calm/scattered, high temperature = intense/focused.
Temperature of 65 with SPY, QQQ, and TLT as top leaders suggests concentrated equity-bond dynamics.
Influence Score
Measures how much an asset affects others in the network.
Market Synchronization
How correlated and interconnected markets are behaving.
Phase Transition
Major shifts in market behavior patterns.
A Phase Transition is when the market shifts from one behavioral regime to another.
Examples:
Warning signs of potential transition:
Phase transitions often happen faster than the buildup. The network structure can show early warning signs before price moves become obvious.
Correlation vs Causality
Understanding what the network does and doesn't show.
Clusters
Groups of assets that move together.