The most notable thing about today's strong action is that there is a lot of speculation in some of the "junk stocks." By this I mean thinly traded issues that have questionable fundamentals and have generally been in downtrends for a while.
In particular, some of the small-cap China names are running big, and traders are shaking the bushes, trying to find things that haven't moved yet in that group. Once something starts to uptick, then others pile in, and that attracts even more buyers.
This sort of trading action can be very lucrative if you are aggressive and very quick. It is just a matter of jumping in with the crowd and making sure you take your gains before the inevitable rush for the exits occur.
I'm playing a few of these names, but this sort of action is indicative of great complacency if not downright confidence. There is little fear out there, and that will support some good momentum in the short run, but make sure you don't forget to take some gains when you can. This is a market for traders, not investors.
Rev Shark Blog Frustrating Day for Some Traders 5/14/2008 11:40 AM EDT Depending on your style, days like this can force you into making decisions you wish you hadn't.
Rev Shark Blog CPI Spurs Rush to the Long Side 5/14/2008 10:08 AM EDT The numbers bring up the 'fear of being left behind' again.
Rev Shark Blog React, Don't Predict 5/14/2008 7:59 AM EDT Leave that to the pundits -- you should focus on the action in front of you.
James "Rev Shark" DePorre is the author of Invest Like a Shark: How a Deaf Guy with No Job and Limited Capital made a Fortune Investing in the Stock Market. He is founder and CEO of Shark Asset Management, an investment management firm, and he also operates sharkinvesting.com, an interactive online community that serves and educates active investors. DePorre holds business and law degrees from the University of Michigan, is a member of the Michigan Bar Association and a former tax attorney and CPA. He lives in Anna Maria Island, Fla., with his wife and two children. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Rev Shark appreciates your feedback; click here.
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