There's just no making sense of this stock market
Investors can't make up their minds whether the grass is green and the sky is blue, or the grass is blue and the sky is green.
If one theme has been consistent in 2014, it's that there has been no consistency. Just a week or two ago everyone seemed convinced that the big correction finally had arrived, and now everyone seems to believe that a little market blip simply has come and gone.
So is this the sign of a good market? A bad market? A normal market? An abnormal market?
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"We're going to have this frustratingly volatile but flat year,'' Jim Paulsen, chief market strategist at Wells Capital Management, said in an interview. "You have this big year, and then you've got to spend some time to re-establish a base to take off from. That in its own right creates some volatility. Some of that's already happening."
Indeed, the stock market is trying to find a concrete direction after a standout 2013 during which the only path seemed to be vertical.
With investors expecting the momentum to continue, January, on cue, turned in its worst performance in years. That triggered a sharp pullback of cash from equity mutual and exchange-traded funds, and an equally sharp drop in investor sentiment survey.
Global ETFs that focus on stocks, for instance, saw outflows just short of $8 billion in January, according to State Street Global Advisors.
Now comes February, though, and investors seem willing to forget that messy start and get back on the bullish trail.
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Just a week after reporting a multiyear high in pessimism, the American Association of Individual Investors saw bullishness make its biggest jump since last summer.
It's all creating a difficult environment for those trying to strategize a market that will have to deal with less stimulus from the Federal Reserve and an economic recovery stalled by a stunningly awful winter.
"If you're a trader and good, maybe this is a wonderful year," said Paulsen, who holds an otherwise bullish long-term market view. "If you're not, I think it's just going to be frustrating as hell."
The news flow Friday exemplified what investors are up against.
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Bank of America Merrill Lynch had been warning for weeks that the January pullback had momentum and likely would continue after a momentary test of market highs. On Friday, MacNeil Curry, the firm's top technical strategist, flatly labeled that view "wrong," telling clients in a note that BofA is now bullish, as "the larger uptrend has resumed."
On the fundamental side, the firm uses five indicators to measure investor behavior through surveys, fund flows and asset allocations. When any of the signs tilt too far in one direction, the firm takes the opposite stance. So if everybody's buying, BofA is selling.
Predictably, few of the indicators are providing a particularly strong sign in either direction, though the balance is tilting toward the bulls.
That's especially prevalent in what the firm calls its Sell-Side Indicator, which continues to show high levels of fear on Wall Street.
"Wall Street's bearishness remains nearly as extreme as it was at the market lows of March 2009," Michael Hartnett, BofA's chief investment strategist, said in a note. "Even though the S&P 500 has risen by [about] 30% since sentiment bottomed, history suggests that strong equity returns can last for years after the indicator troughs."
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With such a dizzying array of cross-signals, then, the lesson for investors probably is simply to find opportunities where you can.
Paulsen at Wells Capital, for instance, recommends that investors look for unloved areas such as utilities and materials, and some under-the-radar moves in commodities.
Keith Springer, head of Springer Investment Advisory, finds the behavior "very normal" in the wake of a big year and thinks investors with a strong enough appetite for risk will do well.
"Basically everyone was ending the year with tremendous positive sentiment," he said. "So if it's obvious, it's obviously wrong. This could be a year you sell in May and go away, but I'm a buyer here."
—By CNBC's Jeff Cox. Follow him on Twitter @JeffCoxCNBCcom.