There always seems to be a severe disconnect in terms of expected news events and the manner in which people actually trade it. I see it happen over and over again, and yet I can't help but scratch my head when these events take place and people act surprised at the general market reaction.
“Buy the rumor, sell the news”, is one of the oldest expressions in trading. Here, we just call it “expectation versus reality”. Is it a patience issue when it comes to people actually trading it, or just a lack of confidence? I think a little bit of both.
During this entire downtrend your local broker analyst and all their friends are blaming this, that and the other thing on a slew of preexisting events that really went absolutely no where. You could blame this downtrend on a slew of other factors (which the media is forced to do on a daily basis) but sentiment is sentiment, and it is not where it comes from that matters, but how strong it is.
In yet the latest edition of NBT's “Expectation Versus Reality”, the markets completely bug off the reality of European downgrades, and trading into the expectation of them actually happening. There is no “shrugging off the news” going on here – we already knew it in early December. Buy (sell) the “rumor”, sell (buy) the “news”.