You Can't Reason With a Steamroller

 | Jan 12, 2018 | 12:57 PM EST
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Stock quotes in this article:

mdgl

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aimt

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flxn

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srpt

Over the years I've often written that momentum almost always lasts longer than seems reasonable. This market action is a particularly good example of it. There is no slowing in the uptrend as the indices hit new all-time highs again on breadth of about 2-1 positive.

One of the big problems that many people have with this action is the gut feel that it isn't reasonable and has to end soon. By the standards of most humans this shouldn't happen but if we want to navigate the market we can't project our definition of 'reasonable' on to the market. The momentum is crushing everything in its way and you can't reason with that.

Despite my constant yammering about staying with the trend until the bitter end, I am having a hard time shaking off some of my nervousness about this market. I have more positions and have been more invested than I have been in a while. It has been so busy lately that I feel I am losing track of some of the better trades. So I am selling down positions and trying to be a bit more concentrated.

I'm not any less bullish but I have to mentally reset a little and the best way to do that is to sell down some things. In a more normal market we would have a natural ebb and flow that would make that easier but this a rampage right now and you have to keep finding ways to put money to work.

I see some particularly good action in biotechnology today. Madrigal Pharmaceuticals (MDGL) , Sarepta (SRPT) and Aimmune Therapeutics (AIMT) are breaking out. I'm adding to a position in Flexion Therapeutics (FLXN) which is trying to come out of a six week long base.

It might seem illogical to see down positions and to keep looking for new buys a the same time but that is how I manage risk in this crazy market.

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