The market continues to create a dilemma for market players. While there is very strong momentum -- with the Dow Jones Industrial Average up 12 of the last 14 days -- we are just too extended at this point to keep chasing. Obviously, many folks were caught woefully underinvested, and they are providing underlying support, but for disciplined investors, there simply aren't many entry points.
What is particularly interesting about this momentum is that it seems to generate so little emotion. If anything, the response to it is more negative than positive, as it is producing significant performance anxiety. Even if you are making money, it is extremely difficult to keep pace with this lopsided action in the indices.
So what do we do at this point? Trying to call a top in this action has been a disaster, but even these V-shaped moves do eventually sputter out. Shorting into this action is hard for some folks to resist, but the key to success on the short side is to give upside momentum plenty of room and to wait for some actual weakness before trying to aggressively pursue shorts.
One of the best things about this sort of action is that it does help to create better individual stock picking, eventually. We need some pullbacks and consolidation, but at least the trend is going in the right direction. Stocks like Super Micro Computer (SMCI), Alarm.Com (ALRM), ORBCOMM (ORBC), Ollie's Bargain Outlet (OLLI) and BioTelemetry (BEAT) are on my radar now, as the charts are developing nicely.
The mood continues to be quite gloomy for such positive price action but if we ever rest there may actually be some good trading to celebrate once again.
