A change in the tide typically brings unpredictable and volatile waters. The same holds true in market expectations. The Expectations Indicator signaled a bear market on September 16th, 2011 and since this signaled change in tide, expectations have been pushing lower and lower.
The Expectations Indicator is still young in its development, but its results have shed light on this volatile market. Currently the market is transitioning from one direction to another (bull market to bear market).
It is difficult to let go of “the way it was” and transition to the new “way”. It is very human to go through stages of acceptance to accept this new “way”.
The market ultimately has to raise its expectations to match current market levels. Once expectations touch this high point, we should expect a large leg down in the market. Until this transition occurs, we should expect the market to have resilience and a slow upward trend, but lack volume due to the bear market prognosis.