The Major Lesson to Be Learned From Recent Market Action

The slaughter of anti-Trump bears continued on Wednesday as the indexes jumped higher after two days of mixed action due to concerns about tariffs. All year long, the bears have been predicting that the market was doomed because President Trump's policies would create inflation and slow growth. It is a typical bearish argument that sounds very smart and logical, but it has just been wrong.

Investors were slightly concerned about Trump's recent move to impose tariffs starting on August 1, but apparently reached the conclusion that it really isn't a big deal, that the economy will do fine regardless, and that concerns about inflation are overblown.

Most notably on Wednesday, Nvidia NVDA blasted to a new all-time high and passed the $4 trillion market cap, and the Nasdaq 100 QQQ squeeked out a new all-time closing high. Bitcoin IBIT also broke out of a very strong formation and hit a new all-time high.

Meanwhile, the biotechnology sector IBB jumped 2.3% on news of a major acquisition by Merck MRK. The group has been a laggard for years, but it is finally showing some signs that a major turning point may be developing. Earlier, I listed 10 stocks I'm watching in the sector.

A big part of what is fueling this market is skepticism about the economy. Many economists have been convinced that something ugly is going to occur soon, but investors who have embraced this thesis have to keep repositioning as the negatives never seem to gain any traction.

Without tariffs as an issue, the bears will be looking for a potential sell-the-news reaction to earnings reports starting next week, but if that doesn't happen, the potential for more poor positioning is very likely.

The lesson to be learned from this action is to respect the price action and not try to anticipate tops, no matter how good the argument may sound.

Have a good evening. I'll see you Thursday.

At the time of publication, Rev Shark was long NVDA.