Strong economic news out of China sparked a worldwide rally and pushed the S&P 500 to its highest close of 2019.
It was a steady climb all day with breadth of around 5,200 gainers to 2,100 decliners. Close to 300 stocks hit new 12-month highs, which is solid but still a long ways from the numbers last September.
This rally caught many institutional investors by surprise and when that happens they tend to put money in the most liquid names very fast. That is why the FAANG names tend to do well on days like this. In addition there is a tendency to put money into index ETFs, which helps to drive up the bigger-cap names that have the heaviest weightings in the index.
Technically, this is a good-looking breakout in the S&P 500 and will cause some anxiety among overly anticipatory bears and underinvested bears. They are trying to reposition quickly as the action today suggests that there is more upside to come.
As I mentioned in my prior post, I was disappointed with the action I saw in many of the smaller-caps Monday. This is partially due to a shift in leadership to financials, semiconductors and China-related stocks. In addition, there were a number of stocks that dipped early and then reversed intraday such as Pyxus International (PYX) and StoneCo Ltd. (STNE) , which was quite different than the way the indices acted.
I would have liked to have put more money to work. However, this was a day to buy indices and very liquid big-caps. The strong close bodes well for more upside. Don't try to fight this momentum.
Have a good evening. I'll see you Tuesday.