The market's recent strength is gaining further traction and is becoming extremely frothy as favorite meme names such as AMC Entertainment (AMC) , GameStop (GME) , and Bed Bath & Beyond (BBBY) are exploding higher. There is increased focus on trying to squeeze stocks that are heavily shorted, and there are clear efforts to take advantage of the fact that many big buyers are still poorly positioned.
While there are plenty of serious arguments that justify this strength, the primary reason that it is so strong is mainly due to positioning. The longer the strength continues, the more painful it is to miss out. This morning we are seeing a natural progression of this action as meme names that have very poor fundamentals and large short positions are being targeted by retail 'apes' that are driving them higher. It is the same phenomenon that occurred at the prior tops, but it can persist far longer than seems reasonable.
Even when you are acutely aware that the action is being driven primarily by emotions and poor positioning rather than solid fundamentals and valuations, it can be very hard to sit on the sidelines and miss out on this sort of action. This is the sort of action that creates FOMO and drives plenty of poor decision-making.
This action often ends with intraday reversals. Watch for a poor close to signal that the character of the action is starting to shift. Currently, the bears are being run over, and the bulls are becoming cocky. This is a warning sign that a turn is coming soon.