The trading on the day before a holiday often has a positive bias, which is probably because people are in a good mood as they look forward to a break with friends and family.
Wednesday was no exception.
The indexes managed good gains with the S&P 500 pushing even deeper into all-time high territory. Breadth was good with nearly five gainers for every two decliners. Over 550 stocks hit new 12-month highs.
While the equity action was good, the most notable action the day before the holiday was the strength in bonds. The iShares Barclays 20+ Year Treasury Bond (TLT) is now at its highest point since October 2016. Some inversion of the yield curve is causing concern, but this flood of ever-cheaper dollars is driving stock buying. Buyers are so anxious to put this money to work that they are throwing it into indexes, rather than individual stocks.
The action Wednesday in individual stocks was relatively sedate, as the buying was more index-driven rather than stock-picking driven.
Despite lower rates, the dollar didn't move much, because rates are falling around the world -- not just in the U.S. That kept precious metals in a narrow range. Oil bounced back after getting pounded on Tuesday and that helped the indexes a little.
This market is extremely optimistic about a dovish Fed decision at the end of July, but first we will have to navigate earnings season. There are a few reports next week, but they really don't start rolling in until the week of July 15. Expectations for the quarter are low, even though stocks have been running up. There will be a very convenient excuse for weak numbers in the form of the China trade war disruptions, but this market seems confident that any downside will be controlled by the Fed's intention to cut rates.
This will make for a very interesting battle. But for now the bulls are enjoying some great momentum and technical conditions remain strong. The China trade issue is no longer a major short-term problem and rebalancing of indexes and inflows at the start of a new quarter have also helped the market. Now we have earnings season, which will change the nature of the market debate as we move forward.
The main thing to keep in mind right now is that the trend favors the bulls.
Have a fun and safe Independence Day. I will see you on Friday.