Two things stand out about the market action on Wednesday -- volume was very light, and it was one of the narrowest range days of the year for the S&P 500. In other words, it was dull, but dull isn't necessarily bad.
The old saying "don't short a dull market" was at work, and stocks managed some decent gains on strong breadth that approached three to one positive.
All major sectors were in positive territory. Big-cap technology led while there was some minor weakness in defensive health care names. Small caps, as seen in the Russell 2000 fund (IWM) , lagged but still managed to gain 1%
There wasn't any specific news to account for the market strength. Pending home sales were stronger than expected, but there is still a 50/50 chance of a quarter-point rate hike at the next Fed meeting in early May. Concerns about banks have declined, and there was some bounce in financials ETF (XLF) , but not much has changed regarding policy initiatives.
The bull's best argument so far in 2023 has been positive price action, and that looked like it was the main driver today. There are reports that retail players are being aggressive again with index shorts. That was a big part of the catalyst for a strong run back in January and may be in play again.
I'm not very optimistic about overall market performance in the months ahead as there are plenty of economic hurdles to jump, but the potential for short squeezes driven by a high level of liquidity can not be ignored.
Have a good evening. I'll see you tomorrow.
