The collision of global markets and social mood

Friday, February 12, 2016

Friday -- Psychology Not Logic

S&P E-mini Futures:
Follow through from yesterday's reversal, sharply higher.

Yesterday was about as good as it gets for a student of social mood.

It started with "grim" and "ugly" and turned into "panic." Extreme sentiment that was ripe for reversal.

It even turned personal, just like it did back in July near the top.

Markets don't run on logic. Markets run on psychology. Big difference.

Remember this chap?

It's totally understandable. People don't usually act until they are 100% convinced that their view is correct. Unfortunately for them their conviction is highest after long trends which are ready to reverse.

That's the reason why people are bullish at highs and bearish at lows.

At such times they are actually providing valuable information albeit wrapped in ego. It's therefore important not to react, but to observe.

Mr Mouse could well turn out to be correct that the lows are not in. The point is that a view contrary to his at that moment was seen as sheer nonsense. Yet in the reversal that followed, the NADSAQ recovered a 1.72% loss and briefly turned positive.

Elsewhere, Reuters reported -- "Unruly markets may derail Abenomics"

From a social mood standpoint it's the other way around. The failure of Abenomics may have derailed markets around the world because it shows that central banks may be losing their grip.

JPY is weaker today, along with CHF, EUR, and AUD. USD & CAD higher. That's weird action, so already a mixed day of cross currents.

Topping tails were printed yesterday on high volume. These could be retested as prices are coming off with lighter volume.

WTI crude ripping higher. NG as well.

Terrible realization yesterday. Platinum, which I scooped up in 2008 for $850, got below that level and I never even noticed. Ugh . . .

So I will be quoting Gold, Silver, Platinum, Palladium, and Copper each day to make sure I keep tabs on all of them.

I plunged into currencies and metals in 2008 as soon as I raked in the booty from my SPY puts from July and October of 2007 which I dumped in the Lehman crash.

The best trade of them all? Palladium. Got it at $178. It crested $900 in 2014.

Gold, platinum, and silver are giving back recent gains. Copper and Palladium higher.

S&P Outlook:
Yesterday's rally off the lows looks a little suspect at the moment, yet price could easily get into the 1845-1850 area today.

I'd love to see 1950 or higher. But I still feel -- and the waves still suggest -- that lower prices could be "in the post."

My upper/lower range is 1750-2000. Sounds nutty I'm sure. But it's got nothing to do with logic.

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