Anyone determined to make strategy, to discover near-to-intermediate term price change must be aware of the dynamics of crowd behavior; if not, that individual operates under a handicap.
The market crowd is no different from any crowd, be it a lynch mob in the antebellum South or the multitudes of Paris at Longchamps on Bastille Day.
All crowds acquire an identity but this identity is not a composite or an average of its members. No, the market mob becomes something else altogether; it is its own organism, generally acting in the extreme, without reason or reflection, sowing violence along the way.
Crowds demand a leader, a god and they at first follow that individual with mindless obedience, gifting to him a whole galaxy of powers to which no one mortal could claim ownership.
Central bank chiefs serve the purpose of demonstration for this sketch.
The ECB’s Draghi has been selected by the market mob as a god. He is expected to deliver and if he cannot they will turn on him in an instant, with an awful vengeance, being the subjects they feel of a gross betrayal.
Draghi simply stated recently that new tools are to be embraced – “whatever it takes.” He did not offer immediate magic, or magic at all but it was expected of him. In fact yesterday he implied these tools will include unsterilized open-market operations but of course only once the EFSF/ESM funds are activated.
The market mind conjured up something else altogether. Desperately grasping at words and taking possibilities to the extreme, refusing to reflect as individuals might reflect the market mob demanded instant gratification and threw a destructive fit yesterday when it did not get it.
Draghi did all he could do but he is not a magician. Due to that shortcoming he would have lost his head in the old days.
In understanding crowd behavior we can often prepare for extreme price movement - that which is manufactured by the market mob but which is to be exploited knowing that it lacks anchorage and underpinnings.
Robert Craven
The market crowd is no different from any crowd, be it a lynch mob in the antebellum South or the multitudes of Paris at Longchamps on Bastille Day.
All crowds acquire an identity but this identity is not a composite or an average of its members. No, the market mob becomes something else altogether; it is its own organism, generally acting in the extreme, without reason or reflection, sowing violence along the way.
Crowds demand a leader, a god and they at first follow that individual with mindless obedience, gifting to him a whole galaxy of powers to which no one mortal could claim ownership.
Central bank chiefs serve the purpose of demonstration for this sketch.
The ECB’s Draghi has been selected by the market mob as a god. He is expected to deliver and if he cannot they will turn on him in an instant, with an awful vengeance, being the subjects they feel of a gross betrayal.
Draghi simply stated recently that new tools are to be embraced – “whatever it takes.” He did not offer immediate magic, or magic at all but it was expected of him. In fact yesterday he implied these tools will include unsterilized open-market operations but of course only once the EFSF/ESM funds are activated.
The market mind conjured up something else altogether. Desperately grasping at words and taking possibilities to the extreme, refusing to reflect as individuals might reflect the market mob demanded instant gratification and threw a destructive fit yesterday when it did not get it.
Draghi did all he could do but he is not a magician. Due to that shortcoming he would have lost his head in the old days.
In understanding crowd behavior we can often prepare for extreme price movement - that which is manufactured by the market mob but which is to be exploited knowing that it lacks anchorage and underpinnings.
Robert Craven
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