Unexpected event that was expected

Some people may read on the Bloomberg today:

U.K. 10-year government bonds jumped, with the yield falling the most in almost three months, and the pound dropped after the Bank of England unexpectedly said it will boost its asset-purchase program to revive the economy.

Then they look at ChaosMonitor chart and see compression signal appearing about half-an-hour before the BOE 'unexpected' announcement. (Compression signals warn about imminent large price moves).


The question arises: "How did the ChaosMonitor algorithm know about such a high impact announcement? How did it come up with the warning of an imminent large move right before the 'unexpected' news?"

The answer may come as a surprise. The market was 'ready to jump' for ANY news, important or otherwise. Its non-linear dynamic state was that of an extremely unstable equilibrium. Any small disturbance of such equilibrium would lead to a violent price move. Bank of England has provided a reason, and the market jumped. If the market was not in such a critical state, any major new would likely to have a small effect on the price.

ChaosMonitor's proprietary algorithm calculates non-linear properties of the market and warns its clients when the market is in a critical state, and is ready for a major change in its behaviour. Today BOE has provided us with a nice illustration of how we can identify moments when 'unexpected' things are likely to happen.

Unexpected event that was expected