Don't Lean on Last Year's Market for Confidence

Doug Kass always asks, "Who's more scared? The bulls or the bears?" It's a great question because it's a much different way of looking at sentiment.

I thought of that this weekend as I read my email, because I called for a correction in the market in early October and I've been bombarded with emails from folks who think I'm nuts. After all, the majority of them tell me, this market is just like what we saw last year, and we never got a correction last year.

My initial reaction to that line of thinking is, if you're that bullish, wouldn't you welcome a correction? Wouldn't the chance to buy at lower prices be a major bonus to you? You should actually be hoping for a correction so you can buy the dip -- that is, unless you've used up all your cash already and simply expect a repeat of last year where we never corrected and went only up. How often does the market repeat itself like that?

I've said it before and I'll say it again: It's only human nature to have our views of the current market shaped by previous experience. We all know that history repeats itself, so we look for patterns that have existed before. The problem with that is that most folks look for the recurrence of patterns that happened quite recently. That doesn't stop folks from using that market action as their template.

For example, immediately after the crash of 1987, everyone kept looking for another crash. Yes, during a 20-year period, we do have to have another experience like '87, but it wasn't likely to be in 1988 (or 2008). And after the tech bubble of 1999-2000, everyone kept looking for another bubble. Sure, we got a housing bubble, but not a stock market bubble.

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Helene Meisler writes a daily technical analysis column and TheStreet.com Top Stocks. For more information, click here. Meisler trained at several Wall Street firms, including Goldman Sachs and SG Cowen, and has worked with the equity trading department at Cargill. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. She appreciates your feedback; click here to send her an email.