Stocks are rampaging higher again this morning following a positive response to Alphabet's (GOOGL) earnings and news that a drug developed by Gilead Sciences (GILD) has positive results in the treatment of Covid-19. There is more news coming from GILD but the big headline is that there appears to be a reduction in mortality in severe cases.
With the indices moving straight up, it is becoming even more difficult to find good entry points and what is troubling many underinvested market participants is that there really has been no acknowledgment by the market of economic issues. Pending home sales were just reported and showed a drop of 20.8% versus expectations of a drop of 13.6%. In a normal market, this sort of miss would cause an immediate reaction but in this market, the issue is whether it is already discounted and will the Fed offset the problem.
I am sitting on very high cash levels right now and see no way to put capital to work in a prudent way. The market will need to pull back or consolidate before conditions will be better for my type of trading. Currently, the market doesn't seem to care if I like the conditions or not.
The Fed is coming up at 2 pm ET and will be followed 30 minutes later with a press conference with Jerome Powell. While no major news is expected, there is likely to be many reassurances that the Fed is going to do whatever is needed to support the economy. The market is already embracing this fact so it may not be a major buying catalyst.
At the close, there will be earnings from Facebook (FB) and Microsoft (MSFT) , which will give us some insight into the level of expectations and whether a lack of guidance is going to matter.
The strong price momentum is keeping the bulls happy but putting capital to work is very challenging.
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