Sigmund Freud once famously said, "sometimes a cigar is just a cigar." In other words, there isn't always some hidden meaning behind the obvious. Markets that are trending steadily higher on positive action may simply be bull markets. There isn't necessarily some nefarious negative lurking in the shadows.
It is important that traders and investors always maintain some level of skepticism about the market. There is always the risk of surprise events but more money is lost worrying about a crash than is actually lost in crashes. Markets that are at highs don't usually just suddenly fall apart.
The drop that occurred back in February was much more abrupt than is typical, however, there were a couple of days of warning when the price action started to shift. Highly reactive traders were able to adjust quickly and escape some of the damage but those that had been bullish likely had some cushion of gains to soften the blows.
The headline reason for the strength Wednesday morning is some progress on negotiating a stimulus deal. Both Republicans and Democrats made some concessions but are far apart on a few issues. We should continue to see the market dance around to these headlines as the political process continues.
The big question about a stimulus deal is whether it will produce the "sell the news" reaction that bears are looking for. The pessimists need some sort of catalyst for downside. They haven't gotten that from the Fed or from earnings season so maybe fiscal policy will trigger selling. I'm not counting on that. In fact, the chances of further short squeezes and momentum on good news seem more likely.
My mantra for a while has been to stay focused on individual stock-picking and that continues to be the best way to approach this market. Trying to time a market turn is not only unprofitable but a major distraction if you are trying to make some money.
Disney (DIS) is reacting very well to its earnings report and will be an interesting tell for stocks tied to economic reopening. Despite the surging number of Covid-19 cases, it is having no impact on the market. It appears that people are ready to move ahead with reopening regardless of the news.
This is a bull market so treat it like one until conditions change. Our job is to take advantage of the opportunities that exist right now rather than fantasize about what might happen in the future. Sometimes a bull market is just a bull market.