Is Wall Street lying to you?

I do hope the bulls didn’t pin all their hopes on the OPEC meeting this weekend. For some bizarre reason, the stock market has tied itself to oil prices this year, the logic being that low oil prices is hurting energy companies, which is true.

But, as JP Morgan stated this week, low oil prices have helped the consumer have more spending money, hence the bulls hailing “the return of the consumer”.

But you can’t have it both ways. If bulls are getting excited about oil prices rising, then the same logic must also mean that consumers will also get hurt. Let’s look at the big picture…

This is just mere logic. As traders, we can bear all this in mind (the fundamentals), but we’ll have our heads handed to us if that’s all we’re going by. And as traders our primary concern is with the mood of the market.

A stock chart is a map of human psychology, figuratively as well as metaphorically, because the prices etched into it are surely the function of emotional, ergo irrational human beings, specifically, and more critically, it’s the product of the collective mind. This collective mind, like all human minds, gets itself into up or down moods, and when each of us is in a good or bad mood, it’s very hard for anyone to tell us otherwise. The glass is either half full or half empty, and right now, the market is seeing the glass as half full, which causes a problem for bears.

I initially got in earlier than I would’ve liked because I was over eager and had a schedule to keep, thus reminding myself of a golden rule: the stock market doesn’t care about anybody’s schedule! Many traders have lost money because the tight-fisted stock market hadn’t delivered a car or a house when required…

Regardless, I got out break even because I had picked weak stocks.

Then I got back in, still a little early, but things were looking better this time. However, this bear market rally, I’ve just read, has been the largest in nine decades, and even has the most seasoned traders scratching their heads. Not as much as the trillion-dollar short position the hedge funds currently have on, I bet!

Anyway, so here we are. Last week the market looked to finally be making all the right noises to finally sink, with the daily RSI plunging along with selling on volume, and then it does a U-turn on Wednesday and sits there all week, waiting for this OPEC meeting that fell apart today.

This is a symptom of excessive, glass half-full optimism, where a person is desperately searching for the slightest bit of good news to hold on to. Well, now, as we head into what should be a brutal earnings season with the comfort blanket of rising oil snatched away, and a market priced for perfection, we will see if the bulls can hang on to their half-full glass or if the bear smacks it out of their hand.

It’s going to be an interesting week, and one where I have to consider that, if there is a drop in stock prices, will it merely be an opportunity to get out of the weaker trades and get some bullish hedges on, or is the said drop actually the beginning of something much bigger where the short term trend drops down another leg…