Back in December it felt like the market would never stop declining. At one point the S&P 500 was down eight days in a row. That streak come to an end when the market hit bottom on Dec. 24.
Since then, the S&P 500 is up 13 of the last 15 trading days and the mood of market players has done a "180." Now, rather than panic over a downtrend that couldn't find support, players are panicky about a market that keeps going up and won't let them in. Fear of losing money has been replaced by fear of missing out.
This action is a good illustration of something I've written many times over the years, which is that momentum tends to last longer and go further than most people think it will. It is the nature of the market to overshoot in both directions.
What is most notable about market sentiment is the growing conviction that the ugly correction has ended and there is no reason for stocks not to continue to trend back up. The reaction to negative news flow this week makes it quite clear that market players are now focused on what can go right rather than what can go wrong.
I have to admit that I'm struggling with the persistence of this bounce. Straight-up moves like this don't produce attractive entry points and I have far too much idle cash. There are some great recoveries in the biotechnology stocks, my highest weighted sector, but I've been shy about adding additional exposure.
In addition, I've been stalking a potential reversal in the indices. While I have not been acting on that to any great degree, it is preventing me from being more aggressive on the long side.
If you are dealing with similar struggles, the important thing is to stay patient and don't act impulsively. If you are having a hard time finding stocks you want to buy, don't sacrifice your discipline to do so.
The action feels almost complacent now, which makes the fear of missing out an even more powerful force.