The story of the day was strong performance by the small-cap sector. The Russell 2000 ETF (IWM) finished the day up 0.78% while the Nasdaq-100 (QQQ) managed to gain just 0.16% and the S&P 500 (SPY) was up 0.29%.
The main reason for the small-cap relative strength was oil and smaller banks. The Regional Banking ETF (KRE) had an impressive 3% gain and the U.S. Oil Fund (USO) was up nearly 2%. There also was some strength in semiconductors, but outside of those groups it was a mixed bag.
The action felt as if it was driven by algorithms today. The IWM moved quite differently than the SPY, which seemed to indicate some sort of large program trade was in place. With just one day left in the first quarter, it would not be a surprise if there was some repositioning and rotation taking place.
For the fourth day in a row, the action started slow and ended with a close not far off the highs. It is low-volume V-shaped bounce action that confounds many folks but seems to gain momentum as the frustration increases.
Despite the strong small-cap action, I heard quite a few complaints from traders who were not well positioned with banks or oils. The biotechnology and technology names they have been focusing on did not perform well today so there was quite a bit of underperformance, which helped drive the computer trade.
Until the pattern of strong closes shifts, it is not going to pay to fight the upside momentum. Despite the mixed action in sectors under the surface, the bulls are still working hard to put money to work. It is a very trite phrase but it continues to be the key to this market -- don't fight the trend.
Have a good evening. I'll see you tomorrow.