It was too simple and easy to work. A solid move to new all-time highs in the indexes, as Jerome Powell discussed the tapering off of bond-buying, sounds like a perfect setup for selling. It appeared to be a classic "sell the news" situation after the indexes enjoyed a five-day winning streak.
Ironically, the pessimistic predictions only made the subsequent move even stronger, as shorts were forced to cover and under-invested longs looked for ways to add exposure.
The most notable aspect of the action this past week was the renewed vigor in small caps, growth stocks, and speculative favorites. The list of stocks up more than 10% Friday jumped higher, and new 12-month highs exceeded 600. Breadth was awe-inspiring at around six gainers for each loser.
A week ago, I discussed the "snake bite bottom," which turned out to be a very timely call. Since my interaction with a copperhead, small caps and growth names have turned up nicely, and speculative trading has exploded once again.
After what happened back in February, it is hard not to be a little nervous about action like we had Friday, but it is still early in the game for many of these stocks as they have struggled with bear market action for months.
The usual pundits will point out that the indexes are extended and look frothy. Still, it is a totally different story for most stocks, and conditions look good for further upside.
Have a great weekend. I'll see you on Monday.