As we kick off a new week, not only are the indices pushing to new all-time highs, but the comments about how crazy and unsustainable this action is are also are hitting new highs. We are warned that something very ugly will occur, but no one knows how or when the inevitable correction will occur.
There are two choices at this point. We can anticipate a big market reversal and sit on the sidelines in the safety of cash, or we can continue to push and try to rack up as many gains as possible while this strong uptrend and speculative action continue. It should be quite clear that I favor staying with the strong action as long as possible. When a change in market character occurs, then we move to the sidelines, but not before.
Two critical issues are driving the market right now. First, there is a continuation of the speculative small-cap trading that is driving some tremendously strong action. Special purpose acquisition companies (SPACs) continue to attract intense interest, with names such as Churchill Capital IV (CCIV) and Foley Trasimene (WPF) gapping up here on Monday morning.
GameStop (GME) , which is the subject of Jim Cramer's opener here on Monday, continues to run up on a targeted short squeeze as small speculative traders search high and low for more targets. Lower-priced stocks continue to attract very aggressive action, but one shift that started last week is a movement back into the FATMAAN stocks. The big-cap technology stocks have lagged until recently, but earnings season seems to have created renewed interest.
So far, there has not been any big positive reaction to earnings, and there is fear that there will be a "sell the news" reaction such as what happened to Intel (INTC) last Thursday, but this morning they are bidding up the FATMAAN names.
It is important to keep in mind that the speculative trading that is taking place has nothing to do with news flow, valuation or technical levels. It is all about trying to catch a hot move. There are no signs yet that the hot money is going to back off.
My game plan is still the same. I'll be taking some partial profits into strength while I continue to look for new buy opportunities. I have no interest in market timing as long as there is a supply of individual stocks that are trading well.