Over the past decade there were persistent bears who constantly questioned the logic of a market largely driven higher by central banker policy and manipulation. It was traditional bull market action so the skeptics were mostly ignored as the trend higher continued. However, the talk about the illogical price action never stopped.
Talk about the market being illogical is occurring again now and it is the loudest and most persistent that I've ever experienced. Market participants are struggling to reconcile a pandemic and an economic collapse with very positive stock market action. The Nasdaq 100 ( (QQQ) ETF) is only down a bit over 1% this year, which is mind-boggling considering that fundamental negatives are the worst many of us have ever experienced.
There is an old market saying attributed to economist John Maynard Keynes, "the market can remain irrational, longer than you can remain solvent." Many traders are taking that to heart and embracing this market although they have no confidence in the logic of doing so. Other market players find justification for the price action in various ways such as attributing it to Fed-created liquidity and hopes that the economy will reopen sooner rather than later.
The only rational way to navigate a market like this is to stay intently focused on price action. The only truth in the short term is price action. If you are using logic, fundamentals or charts, it will be very hard to find a compelling reason to support this action.
The most likely reason for the strength is a combination of short-covering and fear of missing out. Cash levels have gone up and few people expected a V-shaped move but now they are worried that the market is not going to let them in. While they don't trust the logic of the movement there are few forces more powerful than fear of missing out.
I added to my Stock of the Week, Schrodinger (SDGR) , and am looking to beef up a position in Slack Technologies (WORK) . Still, I continue to maintain very high levels of cash. A lot of folks are betting that this V-shaped action continues, however, the risk of that belief is too high for me.