Rev Shark:
Market's Road Rests on Digestion of Apple's News
4/14/05 8:38 AM ET
"Individuality is founded in feeling; and the recesses of feeling, the darker, blinder strata of character, are the only places in the world in which we catch real fact in the making, and directly perceive how events happen, and how work is actually done."
-- William James
The complete and utter failure of the market to follow through after the big intraday reversal on Tuesday demonstrated how negative market participants are feeling. In the dark recesses of their minds this market simply can not be trusted. The market has made several feeble attempts to turn in recent weeks but each time it fails, the unhappiness and pessimism grow deeper.
The market has had some good news to work with but trust levels are so low that even good news is just seen as an excuse to sell. The latest example is the reaction last night to a very good earnings report from Apple (AAPL:Nasdaq). The report could not have been much better but folks distrust this market to such a degree that they sold anyway.
The failure of the market to bounce at all as crude oil has fallen more than $8 also demonstrates the negativity of market participants. We are in an environment where all news is bad because there is simply no confidence that buyers will show any real resolve in putting their cash to work.
The positive side of this deep dark gloom is that it means that the folks who are inclined to sell are much more likely to have done so. When unhappiness is intense people act and when they have all acted the selling pressure will recede.
The total disregard of good news by market participants may be a sign that we are approaching an extreme in negative sentiment. How can the market become even more negative when it already is treating all news as bad?
Trying to measure the intensity of negativity is a very dangerous game -- it isn't something that lends itself to easy measurement. Market participants have a tendency to act and feel to an extent that seems totally unrealistic. We have to be very careful about trying to impose some rational measure of feelings in a situation where people act irrationally.
The key today will be the reaction to Apple. It was a good report but until market participants start buying the stock rather than selling, it is irrelevant. If Apple turns up, watch for this market to follow.
We have a flat open shaping up. The dollar is strong, oil's down a little and the market seems a bit dazed and confused after a truly ugly day yesterday.
Gary B. Smith:
