News that the Senate was close to agreeing on a border deal that would avert a second government shutdown received the credit for a fast and furious rally today. That news provided a spark that helped to set the fire but this strong rally was driven primarily by technical conditions. Market players didn't see it coming and were not well-positioned for it, which is what helped it gain so much strength.
Breadth was better than 3 to 1 positive which is a reflection of the mad scramble to add long exposure. They piled into the FAANG names and many other groups as well as the fear of missing out (FOMO) took hold. The momentum slowed in the afternoon and there was no ramp up in the last 45 minutes for the first time in 15 sessions, but there were no notable pullbacks during the day.
The S&P 500 managed to move through the 200-day simple moving average at 2,743, which is a key upside level that many have been watching. I suspect that some technicians will view that breakout as a contrary indicator and are looking for a reversal at this point but the strength of the momentum today makes that a tough call.
What I like best about this market is that it isn't just positively correlated action. Stock picking is being rewarded. Pyxus (PYX) and Corbus Pharmaceuticals (CRBP) are two examples I noted this morning and there are many others.
The bulls will tell us again that the indices are extended and have run too far, too fast. We know that but we also know that momentum tends to last longer and run further than seems reasonable. It is important to not be overconfident and to manage positions to make sure you don't give gains back, but also it is important to respect the price action and not be bearish until there is some weakness.
Have a good evening. I'll see you tomorrow.