Zbigniew Piekarski ticks his way through the markets.

"Nature never deceives us; it is we who deceive ourselves."

- Jean-Jacques Rousseau (Émile, 1762)

Like it or lump it, the probability is that you are a direct descendant of Australopithecus Africanus who roamed the earth some five million years ago. You may disagree with this statement. You may hold the belief that your ancestors were created "in the image and likeness" by an omniscient and omnipotent Other on the sixth day some 12,000 odd years ago.

Regardless of which line of thought you choose, you must agree that despite our differences of race, colour or creed, we share several inherent behavioural patterns. I am referring to our base instincts or innate drives.

As a social species, we have developed instinctual bundles which guarantee the survival of our group. We are both territorial and hierarchical. Possessing our own territory is a biological imperative. We need to belong - to a place and to a group. And our identity is defined through the exclusion and elimination of those that are not like us.

That is why the Anglo-Saxon-Slav alliance will experience problems in the land of the Mussulman, regardless of its stated intentions. The majority of the local population will see them as "outsiders" and will condone and even abet resistance.

Reason evolved to augment the direction of our innate drives that elicit it. Reason rarely makes decisions - our drives and our basic emotions do. We use reason to effect the decision that we have made or to explain it.

What does all this have to do with the markets? Everything.

If you actually believe the explanations given by the jabberwockies for why the market acted as it did, then you are assigning the same type of causality that exists in the world of physics and does not belong to the world of human activity.

Let me share something with you. A "tick" reading is a real-time market indicator that shows the net total of the number of stocks last traded on an uptick minus the number last traded on a downtick. A review of the data amassed on the US market by quotation vendor CQG reveals some interesting information.

>From 1988 to 2000 (13 years of the bull market), only 19 months saw the count above 1,080. That is only 12.2% of the time. However, from January 2001 into March 2003 (all 27 months of the bear market), the count was above 1,080. In other words, 100% of the time there had been a buying panic in the month.

The weekly data are even more lopsided. From 1988 to 2000, only 24 weeks of 681 had readings higher than 1,080 (3.5%). From January 2001 to the week of March 14, 2003, 71 weeks of 114 (62%) exceeded this number.

During the bull market, the biggest year for weekly ticks above 1,080 was 1998 (with eight), and this was the year when the number of advancing shares over declining shares peaked. The second biggest two years were 1997 and 1999 (with five). This period was one of historically high bullish excitement.

And yet, this measure of bullish excitement has increased from 2001, as the markets have fallen. Is this rational?

Now let us have a look at negative ticks. From 1994 to 1999, there were 41 months of 72 (56.9%) in which the ticks reached minus 1,225. Since 2000, there have only been six months of 38 (15.8%). The weekly figures reveal about the same rate of difference. From 1994 to 1999, there were 70 weeks of 315 (22.2%) in which the count was minus 1,225. However since 2000 and to the week of March 7, there have been only 10 weeks of 167 (6%) that did so.

Therefore, the number of big negative tick readings since 2000 has subsided, while the number of big positive tick readings has soared.

What is the explanation? Remember that bull markets climb a "wall of worry" and bear markets slide down a "slope of hope." During a bull market, investors are prone to "panic out" from time to time because of the wall of worry. They are afraid of losing their profits. Unfortunately, when there is no longer any worry, there is no more upside potential and the bull market ends.

During a bear market, investors see prices as cheap. They are convinced that the market will explode on the upside at any moment, and they are deathly afraid of missing the big gains to come. Therefore, buying panics occur. This change of attitude keeps the market alive until the time of hope disappears. Once it does, then the market has reached bottom.

>From March 13-21, the tick reading surpassed 1,000 eight days in a row - which is a record string of consecutive daily buying panics since 1987. The fact that these daily buying panics have been unable to generate decent advance-decline statistics or rising volume is remarkable and bearish. In time and in retrospect, this rally will probably be described as having been the last opportunity for the bulls to have got out of their positions before the worst of the devastation sets in.

Mind you, the Jabberwockies may be right, and Saddam Hussein's demise will trigger massive economic growth, erase the huge debt hangover facing many companies and improve falling profit margins.

On the WSE: The exchange is suffering a temporary blockage. A good dose of Ex-Lax or Figura is the appropriate treatment.

Zbigniew Piekarski is a portfolio manager based in Warsaw. He can be reached at zbigp@bipnet.pl.