I think the psychological aspects are quite interesting here, almost a mirror image of the top. If we look around now, there is a lot of talk about potential new problems (Argentina, U.S. Dollar, current account deficits) that will make the economy tank, events that are going to dump this market into Neverland. While it may come to pass that there is another, even bigger shoe to drop, it is interesting to see that this kind of discussion has begun.
It was just like this at the top. After the first big break in the spring of 2000, when it was obvious to the technical traders that the parabolic move up had broken, there were all kinds of discussion about how there was going to be more good news that would take the market up one more time.
The net effect is that at the top, no one saw risk to the downside. Sure, there were always the permabears doing the equivalent of the raindance (dance until it rains) but even they never caught on really until it was too late. The perception there was that eventually the market would snap, but an imminent huge move to the downside was not really on the radar, and certainly the timing could not be divined. Now, with all the new fundamental bearish arguments, you can see that the perception is that there is no thought that a good bear market rally can follow.
We live in interesting times.
T. |
