Momentum has a tendency to last longer and go further than seems reasonable. It is the very nature of strong markets to feed on themselves. The strong action creates Fear of Missing Out (FOMO) which is just another way of saying that it climbs a Wall of Worry. The worry is being left on the sidelines as the market continues to climb.
Strong markets create a positive feedback loop. People are concerned that the strength won't last but then when the market refused to pullback, they capitulate and put some cash to work. That new cash creates more upside and then the fears of being left out grow even stronger.
While positive momentum is pushing the indices to new all-time highs, the big story in this market continues to be sector action and the stock picking in small-caps. The momentum is small cap stock picking is some of the best in many years and it is not reflected in the indices which are trending higher but not like many individual stocks.
Several themes are in play this morning. First Bitcoin (GBTC) is flying higher on news that Tesla (TSLA) has invested $1.5 billion in the cryptocurrency. This is compelling proof that Bitcoin is gaining institutional support. I discussed this very point in early January when I named GBTC one of my top picks for 2021. Other stocks moving on Bitcoin are Marathon Patent (MARA) , Riot Blockchain (RIOT) , Canaan (CAN) , MicroStrategy (MSTR) , and PayPal (PYPL) .
Other themes in play are cannabis following some tweets by Senate Majority Leader Schumer. There also is a large filing by famed fund manager Bill Miller in Green Thumb Industries (GTBIF) which is helping sentiment in the group.
To navigate the market it is necessary to stay focused on the stock picking action. Some markets are about index timing and macroeconomic news and other markets are about stock picking, sectors and themes. The latter favors small investors that focus on individual stocks and that is what we have.
This sort of action is tough on 'big picture' pundits that are predisposed to keep looking for market turns. They can't do much as they sit there and watch all these small traders aggressively trade while they predict that it just can't last much longer.
It won't last forever but my plan is to stay with it as long as possible. I'm far more focused on finding new opportunities than I am about predicting a market top.