Poorly Positioned Skeptics Fuel a 'Rampage of Buying'

The S&P 500 (SPY) gapped higher for the second day in a row Thursday following lower-than-expected inflation data.

This time it was the PPI, which came in at 9.8% versus expectations of 10.4%. That is still one of the highest levels in decades, but to put it in sports gambling terms, PPI "covered the spread" even though it still lost the game.

Extremely high levels of skepticism and poor positioning are fueling this very strong action. Many market players were convinced that the action on Wednesday was totally unjustified. Those same folks are now even more poorly positioned and trying to find a way to keep up with this rampage of buying.

Breadth is running better than 3 to 1 in the early going, but we still have less than 100 new 12-month highs, which illustrates how far most stocks have fallen and still need to recover.

I've been a net seller primarily because I'm not finding new entry points, and it is prudent to take some profits when there are big moves.

Biotechnology continues to be my primary focus. I've mentioned Veru Inc.  (VERU) several times, and it is being viciously squeezed higher following very positive and promotional comments by the CEO on its conference call. The stock was attacked by several shorts, but analysts say they failed to understand the data. It is a battleground stock, and currently, the shorts are in trouble.

Verona Pharma (VRNA) , which I mentioned Wednesday, priced its secondary offering at $10.50 and is performing well. Other biotechs such as Bellus Health (BLU) , Amylyx Pharmaceuticals (AMLX) , and Lantheus Holdings (LNTH) continue to perform.

This is an extremely tough market for new entries right now, but that is exactly why it keeps running. Underinvested market players are forced to chase, and FOMO is driving a lack of discipline.

At the time of publication, Rev Shark was long VERU, VRNA, BLU, AXLX and LNTH.