Market Analysis: “Irrational Apathy”

It was Greenspan, who on December 5, 1996, coined the phrase, “Irrational Exuberance” at a speech given to the American Enterprise Institute. Today we are seeing the exact opposite of which, Shareplanner calls “Irrational Apathy”. The markets continue to sell-off beyond what seems possible – to the same extent that the Nasdaq in the 1990’s rose up to 5000. The Nasdaq at that time reached a point where it continued to rise in value, because that is exactly what everybody assumed it was suppose to do. No one thought that it would ever end, and that it would be the center of perpetual profit.

Today is no different. You have not only the NASDAQ, but the Dow, Russell, and S&P going down at epic proportions, and though there are plenty of good reasons for it to go down, it has reached a point, where it continues to go down further than what seems logical, and continues to decrease in value because that is simply what everyone assumes it is suppose to do. People are getting desperate and now many of those who had expected to retire within a few years, have had a change in plans.

As a result, the market is now entering a stage where those who are still in it, are becoming apathetic to the losses that are mounting. Losses of 1%, 2% even 4 or 5% doesn’t seem to hit a cord like it used to. One could argue that we are beyond panic and fear, and instead, investors have simply become numb to whatever happens from here on out.

We have been quiet as of late with our trading and here is why: The markets are so overly extended to the downside – almost parabolic, to where it is impractical to initiate a short position at this point. However, it makes no sense to establish a long position as there is clearly no stock out there that is capable to withstand the selling pressures this market presents.

Here’s the Nasdaq and S&P charts…