Beyond Exuberance – Pre Default Edition

It is an irony that Nobel prize for economics had to go to Robert J. Schiller on a mad, mad day.

Markets acting out the work that he has done on irrational exuberance right on cue – on the widely quoted Reuters article that only stopped short of saying the issue was resolved.

For the sake of the US borrowing more money and a government stoppage, stock markets have rallied higher on the month and will proceed to rally further once the deadlock is resolved.

Currencies and gold behaving like it is the end of the world and like everyone is town is about to win the lottery. It is just another day living beyond exuberance or mind fcuk ?

Market psychology is that we believe that everyone out there are fools to have sold Gold yesterday morning and to sell down the USDJPY and EURUSD just on the Fat Hope that the Reuters article was founded, right down to facial expressions and smile analysis.


Most of the market are smart and all on the same side – cynical of the purported resolution. And the “market controllers” knew that because they can see the positioning and the stop loss order books.

So I bought Gold at 1266 and cut out 1256 like the others out there, dancing to the tune of the puppet masters. And I know many others slaughtered in the Eur move up and did not live long enough to see its fall yesterday for 4 consecutive hours.

And we were right. There was no resolution to the debt ceiling crisis but I  lost money in the process as well.

Schiller’s work proves that “market mind fcuks” can be intentionally created by systems and people. Like in the case of Gold the day before, 5000 contracts “at market” order was good enough to cause a 25 buck plunge and cause irrational behaviour to follow.

Then I wake up this morning the pre-default day and suddenly the mood is cautious again. This time traders quite sure that something will not be happening tonight because Congress needs some hours to read and some more hours to vote (on the Senate’s proposal which has not been passed) and the White House will need time to reply.

The irrational idea ?

Trade for the 11th hour surprise !