We haven't had a Fed-driven rally in a while, but Janet Yellen made some dovish comments in her prepared remarks for Congress and it was like the days of old. The Nasdaq 100 ETF (QQQ) trended upward all day, the S&P 500 had some selling into the close and the Russell 2000 ETF (IWM) lagged all day, but breadth was stellar, with about 5,200 gainers to 1,550 decliners, and the mood was quite upbeat.
There have been several strong days like this in the past month, but in almost all cases the market reversed the next day and things have been pinned down in a trading range. Neither bulls nor bears have been able to generate momentum.
The bears have been hopeful that this choppy and indecisive action was signaling the long-anticipated top, but they have been unable to close the deal. The bearish narrative has been very clear recently and includes the inability of President Trump to pass fiscal reform and a more hawkish Fed. Yesterday, the market showed it wasn't too worried about Trump and today it showed that it isn't too concerned about the Fed.
The issue now is whether the bulls can build on this action for a change. Although volume was lackluster, technically the bulls are in good position here. The S&P 500 is ready for an assault on the all-time highs that occurred in June and it could lift the other indices as well if there is a breakout.
Yellen testifies before the Senate tomorrow and could have an impact again if she is asked the right questions, but the pattern of action has not favored another positive day. If that changes, there will be some short-covering as well as chasing by underinvested bulls, but don't be surprised if the trading-range action continues.
Have a good evening. I'll see you tomorrow.
