Perception, in my mind, is one of the most powerful forces in the market. Perception can help drive the market up or down and currently that direction is down.
Disillusionment happens when investors become so stressed out that they become disenchanted with the market, remember 2008? That is what I think is beginning to take place right now in the markets.
Let me give you an example with a well-known stock. Just two weeks ago Amazon was flirting with the $700 level and investors were falling over themselves to get into the stock that they thought was going to go much higher (perception). Now here we are 14 days later and Amazon has dropped over 20%. Did Amazon's business change dramatically overnight, are the prospects suddenly bad now for Amazon? The answer is no, what did change was perception. Almost overnight everybody who wanted to get into this stock became stressed and disillusioned and then wanted out. Continue reading "When Perception Meets Disillusionment"