Extended Market Makes Finding Entry Points Tough

 | Oct 02, 2017 | 10:52 AM EDT
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This morning's continued strength is surprising enough given how extended things have become recently, but it is even more surprising when it occurs when there is such dramatically ugly news in the headlines. The forces that drive the buying are completely unconcerned about anything other than the price action.

Breadth is running about 4,000 gainers to 2,500 decliners and new highs are piling up again. The chip sector is particularly hot and biotechnology has some very aggressive momentum-chasing taking place. The FANG names are not performing particularly well, but that is outweighed by financials.

The dilemma of this market is that it now is extended enough that it's difficult to make new entries, but the amazing strength should scare away bears who are looking for a reversal. There is just no logical way to gauge how much further this market can run even when it is technically extended by most measures.

Some of my recent buys continue to run up nicely and I am trying to resist the urge to keep selling down into the strength. Jupai Holdings Ltd. (JP) , Nova Measuring Instruments Ltd. (NVMI) , Ultra Clean Holdings Inc. (UCTT) and Zogenix Inc. (ZGNX) are a few examples.

The hardest thing in trading often is staying with the momentum. It is our natural inclination to argue with strength that seems unreasonable. The concept of "reasonableness" can be a major handicap in this market.

I find that in a market that is moving like this I become less long as I'm unable to add new buys. I don't try to time tops, but it happens by default when I manage individual positions.

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