It is a market dominated by hope. There is the hope that one good data point or “breaking story” will emerge from somewhere, anywhere and will reverse the malaise that has characterized this market since the early April, 2012 top.
There is the ultimate hope that the Federal Reserve will initiate QE. Everyone is banking on this. We know that QE won’t save the economy or put off the inevitable recession, but it may provide hope for stock prices. But whoever said QE was about Main Street in the first place?
There is earnings hope. But market darling, Apple, didn’t get the message. Oh that’s ok, this is just a temporary hiccup in the road and of course, it is a buying opportunity. At least this is how one analyst put it yesterday as they were 100% positive that Apple would be higher 6 months from now.
There is the capitulation hope. This is hoping that yesterday’s price action was capitulation. It seems a little early for investors to capitulate as prices haven’t fallen too far, but after capitulation, we all know that prices must go up. So I guess we can hope for that.
There is also the oversold bounce hope. Measures of market breadth, like the McClellan Oscillator, have become oversold, and the markets always bounce when they become oversold. Don’t they? Then of course, we can hope that oversold bounce will morph into something more.
Lastly, there is the “R” word hope. This is hoping that the “R” word is resilient and not recession. Investors are hoping that the markets are resilient and will come roaring back. But the data seems to point towards recession.
Hope is wonderful, and for investors, who are positioned poorly, hope is all you have at this point. Just remember, hope is not a strategy!