If you had conducted a poll over the weekend and asked investors what they thought the S&P 500 would do in the next two days, I am quite confident that "rally almost 3%" would have lost in a landslide.
Market players are scrambling Tuesday to not only navigate the action but to explain why it is occurring. There is no doubt that many folks were poorly positioned for this level of strength and are trying to reposition but many others are simply feeling frustrated and doing little.
Investors like to believe that the market is strong because it is anticipating their preferred outcome. Some say it's a sign that Biden will win, some say it's because Trump will win, and some say it is a sign that the election will not be disputed.
I'm not sure the market is very good at predicting what will happen but this action stirs up fear of missing out (FOMO), which is helping to drive steady buying. Breadth is extremely strong at around 6 to 1 positive, which is probably caused in part by program trading that can reverse quite fast.
New 12-month highs are very low at just over 60, which suggests that this is still a market with substantial overhead resistance. FATMAAN stocks are acting better, but small-caps ( (IWM) ETF) are up over 2% and seem to benefit the most.
This strong action does raise the question of whether a "sell the news" reaction is more likely once we have some election clarity. While we are already pricing in some very positive market news, that will be reassessed quickly as actual news occurs.
I'm not at all inclined to chase this market right now and am doing little other than riding my existing positions.