It was Cypriotic.
This past week the mediashpere frenzied on the prospects of a Cypriot bank run after the country reported that it would tax accounts.
It began on Saturday and I warned then that this was way out of proportion.
Sunday night, futures dropped as much as 2%, fueling the fire and the S&P opened Monday morning down 15 handles.
Headlines everywhere spread loaded words like contagion and I wrote Monday morning:
I was not at all surprised by how quickly panic readings went from 0 to 60 on this Cyprus and have recently posted about the high emotional reactivity epidemic among investors here and here.
Many are waiting anxiously for the next shoe to drop. We have been conditioned by market behavior and macro events over 14 years of bubbles, crashes, wars and political incompetence.
Reading this post will not help you recondition but writing about your experiences in excruciating detail and then reviewing your writing later for processing might.
Cyprus is the size of a peanut and in the scheme of things, who really cares. Could this be the beginning, the catalyst, of something much bigger, perhaps, but likely it won’t be.
Its just sentiment reactivity people and its a bullish indication as it behaves like a protective put beneath the market when events look like extreme sentiment bottoms on the snap of a twig.
The nation and the collective market participant is so frazzled by an enduring uncertain and sometimes shocking environment, that the natural tendency is for people to overreact and when we are in such an environment for a prolonged period of time, we tend to overreact x10 and without rational cognitive mediation.
Here’s a great chart @finansakrobat posted to StockTwits on Wednesday of the SocGen Sentiment Indicator depicting the “spectactular turn for sentiment” into Risk Averse territory. Wow:
We don’t think about it, we just freak it.
If the market is going to correct here, and it may, its not going to be because of Cyprus though you will hear ridiculous hindsight attributions along the way.
Make sure you have a plan going in and stick with it as long as it is a good one.
Related:
Panicking About Cyprus? Here’s What To Do First