Yesterday I asked the rhetorical question of whether a more-hawkish Fed would be the tipping point in this market. The indices have been barely holding to a support, and it was a hawkish Fed that sent the indices down in January and February -- so why shouldn't it happen again?
The answer today is that the recent surge in Fed hawkishness is not the tipping point. We are completely ignoring yesterday's worries, and breadth has reversed from 3 to 1 negative to 3 to 1 positive. Semiconductors are leading the charge, but it is broadly positive action.
Either the market thinks the hawkish Fed members lack credibility, or that their economic forecasts are off. There are good arguments for both. One thesis that has gained traction is that the Fed may hike in June or July, but that the sputtering economy will stop any real efforts to normalize rates.
Whatever the case may be, the market simply is shrugging off the Fed worries, and we are back to the old pattern of squeezing shorts and frustrating underinvested longs. The recent action is ideal for creating underinvested bulls. There simply hasn't been much upside momentum, so the cash reserves have been building. On a day like this, there is a rush to put that cash back to work -- and it is not easy to do.
I have a number of names on my watch list, such as Acacia Communications (ACIA), BioTelemetry (BEAT), Pure Storage (PSTG), Teck Resources (TCK), Celator Pharmaceuticals (CPXX), Mitek Systems (MITK), Neogenomics (NEO), Synacor (SYNC) and Evolent Health (EVH), but I'm staying very selective with my additions. I'll be looking for more buys into the close.
I have to admit that from a trading standpoint, I'd prefer more aggressive downside moves to shake things up, but the market doesn't seem to care what I want. Right now, we have strength -- and that is where the traders are.