What's been particularly fascinating about the market this year has been its refusal to embrace a negative narrative. The bears had another opportunity to build on seemingly negative news Wednesday after a disappointing press conference by Federal Reserve Chairman Jerome Powell -- but they didn't.
The indices sold off for a couple of hours, but the S&P 500 has now bounced back and completely regained all of its post-Fed losses. Much of the action this Thursday is driven by computerized trading that buys weakness and tends to have a bullish bias.
Algorithms received much of the blame for Wednesday's selloff, but there was an actual news trigger for the downturn. The market has been running up steadily on hopes for an uber-dovish Fed, so there was an obvious change in investors' thinking (albeit only a brief one).
By contrast, Thursday's buying is a function of algos that only focus on price action. The reasons behind Wednesday's selloff don't matter to these buy programs. Wednesday's selling created a trading opportunity and that's all that matters.
The more difficult question after this sort of bounce is: "How much additional momentum will the market generate from here?" Sellers are obviously incapable of producing sustained downward pressure, but can buyers push things up to new heights without some additional catalysts?
Thursday is the first day of a new month, and that tends to have a positive impact on market action as new inflows into 401(k) and pension plans get put to work. But without more and more Fed dovishness, it's going to be difficult to attract longer-term buyers.
What's working better than trying to time short-term directional moves in the major market indexes is to make trades in individual stocks. I'm liking the stock-picking action here, and the fact that the indices are holding up well helps quite a bit.
Still, I'm surprised by how quickly and easily the market has recovered from Wednesday's selloff. There's some short-squeezing taking place, and there's also going to be some "fear of missing out" the longer this continues. So, if Thursday's gains hold up into the close, I'll be adding some positions in individual stocks.