The indexes finished Friday with some good gains, but they did not fully reflect the strength of trading in many areas of the market.
Speculative trading in groups such as cannabis, electric vehicles, and a variety of SPACs was extremely strong. A good example was Gores Guggenheim (GGPI) , which is a SPAC that is merging with electric vehicle builder Polestar. The stock jumped 20%, as traders piled in and are still chasing it after the close.
Some of the grizzled market veterans are scratching their heads and wondering how the market shrugged off surging inflation, crashing consumer sentiment, and signs that COVID cases may be picking up. The answer to that question is that this is a market about trading individual stocks, rather than contemplating the big economic picture.
For much of the year, traders were extremely frustrated as the indexes trended nearly straight up, while secondary stocks struggled. Now that we are in the best time of the year seasonally and the Russell 2000 has broken out, traders are staying extremely aggressive and-to some degree-are making the action self-fulfilling.
The action is a little overheated in places, but traders are finding new ideas on a daily basis, and most of these names are still in good shape technically and fundamentally.
Some bears will see this action as a warning sign, but typically it persists longer than seems rational. There is nothing more exhilarating than an irrational market when you are on the right side of the action.
Have a great weekend. I'll see you on Monday.
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