Momentum traders were busy again Monday and returned to big-cap momentum, "stay at home" plays, precious metals, and speculative small caps. The S&P 500 moved over the June 8 highs and is now back at levels last seen in late February. The Nasdaq 100 (QQQ) outperformed, thanks to FAANG strength and managed a gain of 2.85%.
There was no obvious news to drive the buyer although there has been increased optimism recently about the eventual development of a Covid-19 vaccine. Covid-19 cases continue to spike and the eventual economic fall-out will be hard to avoid.
Both Europe and the U.S. are working on more stimulus plans. That additional liquidity gives market players some confidence, but mainly what is driving this market is that the positive price action is feeding on itself. It is a massive wall of worry; the reasons to worry are many, but when stocks run up like they did Monday, then those with idle cash feel left out and put some money to work. As those hesitant buyers bid up the market, the worries about missing out build even higher.
The easy thing to do at this point is to conclude that it is frothy action and that it can't last much longer. Maybe, but we have been hearing that for weeks now and it has been wrong. There simply is no way to logically determine when the current action will shift. Those who are anticipating a turn are simply hoping.
I want to emphasize again that this is a market for stock picking and trading. The most unproductive thing you can do right now is to keep trying to time a market turn. Not only has it been a losing trade for a while, but the opportunity cost is tremendous.
When this market turns down I'm going to suffer some losses, but I believe that the gains that I earn while waiting will make those losses insignificant.
Have a good evening. I'll see you tomorrow.