The bulls were looking for "gap and go" action. The bears were rooting for "sell the news" action. We ended up with a little of both.
The indexes gapped up in euphoric fashion following news that the U.S. and China have resumed trade talks, but that was the high of the day. The indexes sold off slowly and steadily until the final hour of trading, when the buyers went to work.
This is the first day of a new quarter, which means there are automatic inflows into retirement accounts, which may have been part of the reason for the buying into the close.
Small caps lagged and briefly went negative, but breadth was around 4,500 gainers to 2,800 decliners and there were around 525 new 12-month highs. Semiconductors led, but gave back a good chunk intraday, while precious metals lagged. The dollar was strong and bonds weakened.
The reaction to the news would have been complicated enough, but there was the added complexity of the index rebalancing on Friday, which was still reverberating, and the start of a new quarter. Those issues drive structural moves that have little to do with the news or technical patterns.
Technically, the S&P 500 looks quite good, even though it did not close near its intraday high. There is a cup-and-handle formation starting back in late April, and now the move through the pivot point as new all-time highs are hit. This is a healthy looking pattern.
Of course, the bulls scoff at this market for reacting to what they declare is a meaningless agreement with China that won't result in an agreement for many months, if ever. Economic news continues to come in weak, but the likelihood of a Fed rate cut remains very high.
There aren't any immediate catalysts on the agenda, as we head into the Independence Day holiday, so some trading-range action may be likely as things slow. While there doesn't seem to be anything that will cause another jump, it continues to be dangerous to embrace a bearish narrative.
Have a good evening. I'll see you tomorrow.
