Aug

4

Some were saying to expect a big decline in case a debt deal would not occur. A failure to compromise was the "bad news". Eventually a compromise was found. An impressive bear trap was set up. Markets opened sharply higher and accelerated to the downside. So it seems that actually the "bad news", as the markets perceived it, was the done deal. The news is that Mr Market is finally reacting negatively to bad news. It was right about time. Today it went down because there are concerns about a "weak economy"… when over the past months nothing could shake the dip buyers' confidence. The game may be changed. I think a new cycle has emerged and we'll have to study and find new patterns and behaviors. But how many points does the S&P have to go down before they offer another stimulus?

Gary Rogan writes: 

It is true and I even mentioned it earlier today that "a failure to compromise would be terrifying" was one of the big lies our sadistic fascist government has promulgated. I refuse to believe that that in itself was a bear trap. Why? Because it was clear to anyone with an ounce of common sense that while the Republicans had ALL THE CARDS to completely stop the insanity HAD THEY HAD THE WILL (how? by simply refusing to extend the debt limit NO MATTER WHAT) they DID NOT HAVE THE WILL, at least not to go through a few days like today while being blamed for them and not capitulate. So in some sense they HAD NO REAL CARDS, and thus the bear trap would have to be for very innocent bulls, more innocent than one can credibly believe in.

The deal in itself had no effect in my opinion. The market is a very imperfect predictive device in that it acts on emotion at least as much as on the information. A few days of turmoil and orderly declines did indeed shake the confidence enough so that the market finally had an excuse to react to the bad news it has known for a long time, weeks or months. The reversal yesterday gave an excuse to call the end of the improbable down run sequence. The Roadrunner suspended in mid-air for a few moments after running past the edge of a cliff comes to mind.
 


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