The market action Wednesday was not as vigorous as on Tuesday, but it was another day of solid gains after the significant drop that occurred on Monday.
The action was another fine example of how this market has a tendency to produce "V"-shaped bounces. That has been a regular occurrence since the 2008-2009 bear market, and it still catches many market participants by surprise.
This sort of market action creates a rush to reposition as "fear of missing out" - FOMO - comes into play very quickly. No one wants to miss the fast recovery after suffering through the ugly corrective action.
Breadth was 6,350 advancers to 1,600 decliners, and that was reflected in the leadership of the Russell 2000 fund (IWM) , which jumped 1.7% to lead the indexes.
Interestingly, new 12-month highs remained quite sedate with just around 190 names. This is a function of rotational action out of the bigger cap names that were leading last week and into the growth and small caps that have been badly beaten up recently.
We have more earnings reports hitting, and that combined with the better action In secondary stocks is creating a much better environment for stock picking.
We don't want to be overconfident about the continuation of this positive trend, but this bounce has created some obvious support levels and gives us better charts to work with.
I expect that the action will be bumpier as we move forward and deal with earnings reports and macro news flow, but the crazy rotational action that was causing gross distortion in the indices has ended for now, and that makes for better trading.
Have a good evening. I'll see you tomorrow.