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The World Cup, The Riots, The Market

If you are a football fan, probably you have been waiting for June 2014 since July 2010. And probably you are worried, that the riots in Brazil may ruin the World Cup. The news on all the media is getting from bad to worse as the rebellion is getting more and more severe with each day.

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Below are some excerpts from popular media, illustrating the seriousness of the situation.

“Brazil hit by riots against the World Cup as protest marches are taken over by anarchists” – The Telegraph –

“Protesters began a wave of demonstrations around Brazil, burning tyres and blocking highways to draw attention to housing and education needs before the World Cup” – Daily Mail –

“Brazil’s World Cup courts disaster as delays, protests and deaths mount” – The Guardian –

People are trying to find a logical explanation to the why-question. Why is this happening? They say that protestants are unhappy with the economic situation – poverty, homelessness, unemployment. Of course they are. But these problems did not came out of the blue in Brazil right now. These flaws in the country’s economy have been present for quite a long time. So the right question here is not “why”, but “why now?” The mainstream media can tell you plenty of reasons why people are angry, but it can not tell you why the riots are taking place right now. Journalists are trying to connect them with the World Cup, but in our opinion this is pseudo-reasoning.

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Fortunately we are not obliged to count on the mainstream media’s point of view, in order to form an independent opinion. The new science of Socionomics is here to help us. It postulates that social mood drives financial, macroeconomic, political AND SOCIAL BEHAVIOR, in contrast to the conventional understanding that such events drive social mood. Social mood is best registered by price charts. Optimistic and happy people buy, while pessimistic, angry or afraid people sell. We will use the Brazil ETF Index to demonstrate how the psychological condition behind the riots has been depicted on the chart long before the World Cup.

world cup2

As visible, the Brazil ETF Index made its last major top three and a half years ago, in November 2010. This means that social mood was highly optimistic back then. You do not remember any news about riots in Brazil during that period, do you?

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If you look at the chart one more time you will see that prices have been in a downtrend ever since, which means that social mood has been declining from positive to negative. Following the socionomic logic it is normal to think that the worst manifestations of negative social mood will coincide with the period of time, when the market is forming a bottom. In our case the final bottom occurred on February 3rd 2014. Riots began several months before it and are still present. Ironically, the market has already turned up, but it will take time until real-life events start corresponding to this fact. The whole process is another evidence of how social mood leads and the market is the first to know.

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