The conditions have been developing for months, and now we are seeing a classic breakout in the Russell 2000 fund (IWM) to new all-time highs. The index made a preliminary move on Monday, and then after a pause on Tuesday, it blasted ahead 1.8% on Wednesday.
While the small-caps were leaders, it was a very broad move, with the S&P 500 gaining 0.6% as well and hitting another new high. Breadth was good with around 5,600 gainers to 2,400 decliners, but bigger cap names lagged a little. There was a long list of stocks moving more than 10% during the day and about 10 that managed a gain of more than 25%.
What was most entertaining about the action is that many of the smaller stocks that have been lagging for months started to come alive, and, even after some strong moves, they are not nearly as technically extended as their big-cap brothers and sisters. There still are plenty of intriguing setups, and a slew of small-cap earnings reports are about to hit.
There isn't any formal definition for the terminology, but this is looking like a "melt-up." The fear of missing out is quite extreme, and there even seems to be a wall of worry that is helping to drive things.
The Fed decision on Wednesday helped to feed the strength, even though it announced that it would start to taper off bond buying. This was well-anticipated, and the overall tone of the remarks from Fed Chief Jerome Powell was quite market-friendly. The Fed decision often looks like it could trigger a sell reaction, but it just doesn't happen that often. The market loves to love the Fed.
Have a good evening. I'll see you tomorrow.