In the same way people project unconscious biases or preoccupations on a Rorschach ink blot test, I believe traders unavoidably project our biases on ‘The Market.’ These biases can simply be categorized as bullish or bearish, optimistic or pessimistic.

Although investor sentiment is quite bearish at this time, a recent article by Raymond James’ strategist Jeffrey Saut points out how well the market has held up despite a perfect storm of bad news. He also notes how often headlines augur the end of a important development (i.e. it is now fully priced-in) rather than the beginning of an actionable trend.

This is the same principle of mass psychology that causes traders to capitulate at the exact bottom of a move. Mass psychology (which operates on all time frames) has a compelling emotional component, but savvy traders use it in a contrary manner, rather than as a leading indicator, which it surely is not.