The financial press over the last two days have been worried about the dramatic sell off in Sterling ever since the polls published over the weekend suggested that more people would vote for Scottish independence on 18th September. In truth, the sell-off has taken place in the context of a downtrend following the pound reaching a six-year high against the dollar in July (see the chart below). However, the dramatic nature of the sell off is being interpreted as the markets finally waking up to the possibility of the Union breaking up. Earlier this year, the pro-Unionists had a seemingly massive lead but this has been steadily eroded over time. And now it seems the momentum is with the nationalists. GBP sells off dramatically on the possibility of independence   To anticipate what is going to happen, I look to what the markets are telling me. I learned this from legendary trader, W.D. Gann, in his 1923 book The Truth of the Stock Tape. Gann was not the first market expert to point out that markets seemingly anticipate what is going to happen – the stock tape speaks the truth – nor will he be the last. The trick, as ever, is in understanding how to read the stock tape. Over my summer holidays, I read an excellent book called War, Wealth and Wisdom by investment guru Barton Biggs. This excellent book – which I highly recommend – demonstrates quite clearly that despite the public news and perception of what was happening during the Second World War, the markets tended to be ahead of events. For example, Biggs points out that London Stock Exchange made its low “for all time” in the summer of 1940 just before the Battle of Britain – despite the fact that Britain’s fortunes in the war got worse during the late 1940s and 1941 (in Europe – things got worse in the Asian theatre of war for a lot longer). Somehow, the markets foresaw that Britain would survive the Battle of Britain and that the US would be drawn into the war – a pivotal moment that helped turn the war. Similarly, the high point for the German stock market was at the time that the advance units of the German Army were approaching Moscow, in December 1941. This was a moment in the war when the Wehrmacht was seen to be unstoppable – but the markets knew better. Gann was quite clear that to understand what is going on you should look at charts of the market or stocks. When the market makes higher lows on bad news, this is a sign that things are going to get better. Ascendant Strategy uses this...