The collision of global markets and social mood

Wednesday, August 6, 2014

Confidence As Causality, Plus Reversal Potential

Score one for socionomics. The FT in London ran a headline this morning that correctly showed socionomic causality in the stock market.

Stocks slump as confidence cracks

Even better would have been "Confidence cracked then stocks slumped." But hey, we can't have everything. They drive on the wrong side of the road!

Another great tidbit from the FT was this:

Wall Street's dark day for M&A
More than $100bn in deals wiped off the table in a few hours

That's what happens when confidence shifts. Robert Prechter, the father of socionomics, has been saying so for years. Always great to see it happen in real time.

Europe is down hard this morning after Asia's sea of red. Bloomberg reports that Italy unexpectedly returned to recession and German factory orders dropped the most since 2011, but Bloomberg blew it by adding "as political tensions and slowing global growth threaten the euro area’s recovery."

A better way to say it would be to insert "as falling social mood causes political tensions to grow...."

The real reason for today's dark tone is that futures are falling. But I'm looking for a wash 'n' rinse style reversal this morning. Specifically, the market looks ready to put in a fifth and final wave of the current down sequence.


Assuming that the market does not continue to subdivide lower (always a possibility), a reversal could happen that would strike many as unexpected. First target would be the 1940-1945 area.

If wrong, it is possible that some of those lower levels get tested such as the 1882 area.

Needless to say, it's nice to have cheap options available. SPY 191 or 192 and OEX 855 calls should work.



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