Harvey and Bulldog make very good points about long distance and perceptions at altitude. I did not now about the red thing. Its possible that the hikers did not see their friend at the cables, but I would tend to discount that analysis by a couple of factors. First if the red loss phenomenon were at play, it seems more likely that the observation would have been something like: hey, there's a guy who looks like John, but he's not wearing a red cap". Second, it was this groups 6th time on the mountain, making a wrong turn at the JMT junction pretty unlikely. A lot of coincidences would have to conspire to result in a bad ID.

On the other hand, I assume that last Saturday was a typically busy day, with the trail clear of snow, with how many permits out? Yet apparently no one, not one, has reported meeting this guy anywhere on the trail.

However this turns out, it is a pretty strange case.
Wherever you go, there you are.