The action this week has been market by market with participants wondering how much longer stocks can run higher without significant consolidation or a pullback. There were a couple of small dips on Monday and Wednesday, and stocks dipped again on Friday on news that an oil storage facility was bombed in Saudi Arabia, but the pullbacks have been minor.
Rarely has the market seen the convergence of so many negative events at the same time, yet the action over the last two weeks has been some of the strongest since some major bottoms like in March 2020. The bears tell us that this market is crazy and that there are still many major struggles ahead. The bulls argue that this market is very aware of the negatives and has already priced them in to a large degree.
I don't know who is right about where the market is heading, but this recent action has offered a very good opportunity for some repositioning. I've used strength to reduce some positions and raise cash. I'll be rebuying some of the stocks I've sold, and I don't really care if I end up paying more or less. What I want to see are better chart setups. Many charts have gone from downtrends to overbuy, and they need to develop further before I can put more cash in my favorite names.
I did buy a couple of dips today in NIO (NIO) and ZIM Integrated Shipping Services (ZIM) , but it is still too early to do anything sizable.
One sector that may be particularly interesting next week is cannabis. There has been increased volatility and volume in the sector on news that New Jersey has delayed approval, but there is a vote in the House next week on decriminalization. There is likely to be increased pressure on Democrats to pass some sort of bill prior to the mid-term elections, and that should drive the sector.
The easy way to play the group is with AdvisorShares Pure US Cannabis ETF (MSOS) , which is U.S.-based names, or ETFMG Alternative Harvest ETF (MJ) which includes Canadian names. I like urban-gro (UGRO) , which is a very thin name that builds and designs facilities for growing cannabis. Each state must grow its own supplies, and the sector is underserved. UGRO reports earnings next week.
I like how the market is developing. There should be some better trading action and setups as things pull back.
Have a great weekend. I'm heading out for an appointment.
(Please note that due to factors including low market capitalization and/or insufficient public float, we consider UGRO to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.)
