Market action on Wednesday was the inverse of what took place on Tuesday. The indexes jumped, and breadth was close to three-to-one positive. Small caps (IWM) outperformed with a gain of around 2.4% and was helped by a big move in regional banks -- as seen in their respective exchange-traded fund (KRE) -- of more than 7.5%. Big-cap technology continued to do well, but didn't produce relative strength for a change. New lows were over 200 and exceeded new highs but pockets of momentum picked up nicely after a slow start.
There wasn't any economic data of note, but both President Joe Biden and House Speaker Kevin McCarthy expressed optimism about a debt ceiling deal, which is the explanation that the business media is using for the strength.
The strength probably had more to do with "zero-day to expiration options," poor positioning, and short squeezes, but the media is very focused on the debt ceiling issue and has been playing up the drama. The market has been rather indifferent to the issue, but it is going to be interesting to see what happens if the indices run up more into an agreement.
Although it was a robust day for the market, and the bulls are feeling much better after recent dismal action, it doesn't do much to change the big picture. We still have the indexes extended to a degree due to the narrow strength in big caps and lots of very poor charts in much of the rest of the market. We really can't use the indexes as a measure of overall market healthy right now, as they have been corrupted by strength in a few names due to AI.
We have weekly unemployment claims and home sales data on Thursday and a few earnings reports like Cisco (CSCO) and Alibaba (BABA) , but there isn't much news flow, and that means that the debt ceiling will receive a lot of attention once again.
It was a nice day for the bulls, but the most notable market theme recently has been inconsistency. Be ready for more volatility.
Have a good evening. I'll see you tomorrow.
