Tuesday's market weakness was very quickly forgotten on Wednesday, but what was most notable during Wednesday's session was the very strong action in small-caps and big-cap momentum names.
The iShares Russell 2000 ETF (IWM) gained 1.37% on the day, while the IBD 50 Fund (FFTY) rose 0.94% to hit a new 2019 closing high. By contrast, the Dow Jones Industrial Average ended close to flat, while the S&P 500 only gained some 0.33%. It was definitely an inconsistent day.
Another notable aspect to Wednesday's session was that volume was quite light and much of the action was very dull. In fact, it was practically a perfect setup for a "Don't Short a Dull Market" reaction on Wednesday afternoon, when we got a brief dip following release of Federal Open Market Committee's March 19-20 minutes.
This was another good example of how difficult it is for a negative narrative to take hold on Wall Street. The bears have been very loud lately about slowing U.S. economic growth and the potential for weak earnings report. Strength in bonds seems to confirm at least part of their pessimistic economic view, but equities just don't react.
What's at work here? To put it plainly and simply: Price action.
As long as the price action remains positive, there's a supply of buyers who don't care about any negative arguments. They only care about catching as much upside as they can for as long as they can. That thinking drives the bears crazy, but it's been working for a while.
Overall, the indices remain in very healthy shape technically. The only negative from a chart standpoint is that some things are still extended, but that's hardly a reason for a strong bearish view. For now, the trend is still our friend.
Have a good evening. I'll see you Thursday.