Just another day of gains for this stock market. Volume was higher today as institutions were a bit more active than on Monday. So much for this market taking a breather. This non-stop action while nice as we are riding this wave higher, but it will cause some problems. Sharp pullbacks will likely occur and will shake weak holders. As long as we continue to contain our risk and execute our strategy we will not have any issues. Many will be trying to top tick this move and have already. These gains have been nice, but we do have the jobs report Friday and the number should cause some fireworks. So far so good from this market and we must continue to execute with flawless precision.
There is a very real possibility Friday’s job report could send this market into the stratosphere. Sentiment continues to be on the negative side of the market and when Fund Managers are lagging they will chase performance. There is no shortage of underperforming hedge fund managers! We are not going to anticipate a market rally or fall. Given what we have in front of us we are invested on the long side. Sure, we can take out some portfolio insurance and protect our downside. However, we are likely a little premature in doing so. Stick with the trend.
This market is not supposed to make sense. There are many trying to hammer this market on all sorts of issues. A popular one is certainly valuation. We are trading at a high multiple and if we do end up heading lower the high P/E will be blamed. One thing we do know is these conditions of high valuations and even extreme overbought conditions can last a very, very long time. Price is everything. Follow the trend and cut your losses.
