The indices continue to rumble higher as market players puzzle over the extremely high level of complacency. The attitude seems to be that the indices are sure to be higher a year or two from now so why should we worry about stocks when the Fed is creating such powerful support with trillions in stimulus?
The pessimistic response is that this market is totally mispricing the economic damage that lies ahead and even the Fed and fiscal policy won't be able to stop it.
Right now the bulls are winning the argument and that is causing quite a bit of confusion for folks that just can't embrace the arguments that this market is not going to see any meaningful downside in the near term. Personally, I'm struggling with the logic of the market a bit also. Even with the power of stimulus, I don't think the recovery is going to continue to be this easy.
When the overall market doesn't make sense to you then the best course of action is to focus on trades in individual stocks that do make sense to you. I've been having good success with stocks in the biotechnology sector and those that are related to Covid-19 to some degree. My Stock of the Week, for example, Co-Diagnostics (CODX) makes test strips so of course it makes sense that it should do well and the chart seems to back that.
I don't want to fight the bullish logic that exists for this market although I have my doubts about it, so I'll look at some individual stocks and try to rack up gains that way. It is hard to be really heavily long when you are focusing on shorter-term trades but they can add up quickly when they are working.
The pundits love to predict what the market is going to do next but as I discussed this weekend, you make money by focusing on strategy rather than predictions.
When the good trades stop appearing it will be the tip-off to be more bearish. No great macro insight is needed. Stocks will tell you what to do if you listen to them.