The market was so strong today that the bears were mumbling about "blow-off tops," but they should have learned by now how dangerous it is to fight the trend. There is too much cash sloshing around looking for a way to get into this market.
The dip-buyers were caught flat-footed again and had no choice but to chase if they wanted in. The Russia-Ukraine crisis suddenly became irrelevant and there was nothing left to stop the onslaught of buying.
The point gains were big, breadth was strong and volume was heavy. That is what momentum looks like, and either you jump on the train or wave goodbye as it runs off without you. Yes, it may feel a bit frothy and overheated, but there isn't any good alternative but to jump in and join the party.
What the bears need to understand is that this sort of action creates a huge supply of potential dip-buyers. A ton of money wants in but is unwilling to chase strength. If there is any weakness at all, they will provide significant underlying support.
If you aren't as heavily long as you'd like to be, just keep digging until you find opportunities. They are becoming harder to find but they are still out there if you maintain a positive mindset.
Have a good evening. I'll see you tomorrow.
March 04, 2014 | 1:34 PM EST
No Pressure to Sell
- Dip-buyers aren't going to allow this market to stay down for long.
The most interesting thing about the market today is that the lack of selling pressure so far. It gapped up big and has been inching higher without any pullbacks. Breadth has stayed remarkably strong all day. We will see how it closes, but when a market is this strong, underinvested bulls are likely to buy out of desperation as the day winds down.
This action isn't surprising. It has been clear since the low in early February that market players are desperate to add long exposure and the market is making it nearly impossible for them to buy on weakness. The one-day Russian crisis was the best buying opportunity in a month, and those who missed it are cursing their inaction as they chase stocks higher.
Like many, I'm itching to put more money to work but hesitant to chase too much. I'll be looking at making additions in the final hour of trading. My top potential addition is SunPower (SPWR), which will likely be affected by Canadian Solar (CSIQ), which reports earnings Wednesday morning.
There's still potential news risk, but you can bet that the dip-buyers aren't going to allow this market to stay down for long, regardless of the news.
March 04, 2014 | 10:42 AM EST
Panic-Buying Kicks In
- The hard part is trying to put money to work without chasing.
There's a downright frenzy as dip-buyers who didn't buy yesterday are panic-buying today. Breadth was nearly 10:1 positive in the early going, but that has cooled to about 8:1. All major sectors, except precious metals, are green, with solar energy, biotechnology, retail and chips leading the charge. Small-caps are outperforming again.
The main dynamic is too much money chasing too few stocks. News, like a Russian invasion, is nothing more than an opportunity to put cash to work. There is no fear of sustained downside. The fear is of being left behind, and you can see strong evidence of it this morning as there is outright panic-buying. We have barely seen a downtick since the open.
The hard part is trying to put money to work without chasing. The three stocks I mentioned yesterday, Power Plug (PLUG), E-Commerce China Dangdang (DANG) and my stock of the week JinkoSolar (JKS), are on fire this morning. I don't know how much longer this momentum will continue, but they definitely are not easy buys.
LiveDeal (LIVE) is a stronger mover that I'm adding to today. This has been a momentum mover in the past and it had good news this morning about a "surge in user traffic." There may be room to run there.
All we can do in a frenzy like this is to take partial profits when we have them and keep digging for new entry points. With this level of underlying support, I'm not expecting any quick downside without surprise news.
March 04, 2014 | 7:54 AM EST
Forget the Pessimism
- It is going to take more than a Russian invasion to kill this market.
"Russia is a riddle wrapped in a mystery inside an enigma." --Winston Churchill
Market players didn't seem too worried on Monday as the media breathlessly reported news of a potential Russian invasion of Ukraine. The lack of concern turned out to be quite prescient as the Russians have backed off and the market is flying higher this morning.
What was most interesting about the action on Monday was that there were strong underlying bids the whole time. Market players really didn't want to give up on this market and why should they when we always roar back from any dip do quickly and completely?
This morning the early indications are that S&P 500 will not only recoup all of yesterday's losses but will test the highs we hit on Friday. The only worry, once again, is being left behind as this market continues to fly higher.
With action like this it isn't surprising that we have such a large group of aggressive dip buyers. Buying weakness has proven over and over again to be the smart move. Even shallow pullbacks are good buying opportunities as we seem to reverse so fast. If you wait for a deeper correction you will end up sitting on the sidelines.
The biggest challenge presented by this market is putting idle capital to work. Good entry points simply don't develop and if you don't buy at the very first signs of weakness you will almost never get in. The market was anticipating this sort of action again yesterday and never really sold off very hard. Market players have seen it happen too often and we much more interested in buying rather than worrying about what the Russians might do.
So is it smooth sailing from here? Is this market really to hit new all-time highs and keep on running? It sure looks that way. There is always the possibility the crisis will heat up again, but it looks as if no one really wants a fight.
Our job now is to try to put money to work in a prudent manner. Like all the other dip buyers, I'll be watching to see if the initial strength is faded a bit. A pullback after the open is going to attract plenty of buyers anxious to jump back in.
All you really need to know about this market is that a big supply of cash looking for a place to go. It is going to jump in on weakness like it did yesterday and it is going to chase strength like it is doing this morning. The bears may see some minor weakness at times, but the way to make money is to forget the pessimism and stick with the trend. It is going to take more than a Russian invasion to kill this market.