Pancho, Fleck made an interesting comment about it seeming that people were trapped in their positions. Considering that the Nasdaq is now back to its October highs after a steady deterioration of prices, it seems very likely that a lot of investors feel almost trapped. Taking a loss is a hard thing to do and for much of the mid-cap universe, and even many large caps, people are staring at paper losses. There has been no surprise event to cause them to sell out, so they just keep waiting for the bull to return. They try to add more on the dips, but the rebounds get smaller with each dip, only to be followed by further deterioration. There hasn't even been a good panic sell-off to give them an "all-clear".
This slow death of a market, coupled with strength of bonds and defensive stocks as well as the economic evidence, seems (to me) like the way a bull market should end. If most participants feel trapped in their positions, hoping for that missing bull to wander home and stubbornly refusing to sell because "the bull market's not over", it's only a matter of time before the feeling evolves to hoping just to get even so they can get out. Such an experience will, IMO, have a much more lasting impact than any quick, sharp break that can be attributed to panic by those less savvy.
BTW, the bank stocks looked mixed to me today, in spite of strong bonds. I wonder if they are "decoupling" from interest rate sentiment and may begin to react more to weaker corporate earnings in anticipation of a general economic downturn. No evidence, just a thought.
Regards,
Bob |
