Liverpool followed up their 5-1 demolition of Middlesbrough on Saturday with Tuesday night's 4-2 win against Forest to move to the top of the table above Arsenal.
But the Gunners can regain first place if they beat Forest at the City Ground on Saturday - and James believes Liverpool need to underline their title credentials with a win at St James' Park.
Liverpool have opened up a seven-point lead over fourth-placed Newcastle, whose 2-1 defeat at Coventry on Tuesday left them without a win in five Premiership games. James is hoping the Anfield club can add to Kevin Keegan's problems.
"With Newcastle losing at Coventry it's created a bit of a gap but now we've got to go there and beat them on Monday," said James. "Nine goals in two games is good going but we're not getting carried away. It's OK beating Middlesbrough and Forest but you've got to do it in games like Monday's at Newcastle. You've got to beat the teams that are pushing for the title as well."
James admitted that Stan Collymore had staked his claim to renew his partnership with Robbie Fowler at the expense of Patrik Berger after two great displays against Middlesbrough and Forest.
Collymore had a hand in three of Fowler's four goals in his comeback game against Boro and on Tuesday he scored two and made another for Fowler against his former club.
"Stan's done well in the last two games. He's been given an opportunity to do his thing and he's impressed," James said.
Collymore and Fowler plundered 55 goals between them last season, making them the most prolific strike pairing in the Premiership. Liverpool's manager, Roy Evans, is hoping that Collymore can make up for lost time now that he has put his early-season problems behind him.
Collymore's double strike against Forest took his goal tally to six for the season while Fowler's lone success took his total to eighteen. At the same stage last season, Fowler had thirteen to Collymore's four.
"We know what a good partnership it can be, 55 goals between them last season doesn't lie," said Evans.
"It's a late start for Stan but, if he puts his best foot forward, who knows what can happen?"
The Nottingham Forest manager Frank Clark has the unenviable task of trying to his lift his side after a defeat, a loss which leaves them three points adrift at the foot of the table and without a win in sixteen games - a new record for the Premier League.Reuse content