Several of the largest gains in the market this year have come in reaction to dovish comments from Fed Chairman Jerome Powell. Powell again helped propel the indexes higher Wednesday with the S&P 500 breaching the 3000 level briefly during the day, but the action wasn't quite as euphoric as it had been on previous celebrations of a friendly Fed.
Breadth was good and there were sizable gains for the major indexes, but small caps lagged and the early highs in the indexes were never surpassed.
The market has been running on hopes of a dovish Fed for a while, but we have to wonder if there is a point where the market isn't going to celebrate the same news over and over. Won't a dovish Fed be fully discounted at some point? The milder response to Powell suggests that the answer is "yes," but there was still enough positive momentum to overcome any "sell the news" inclination the bears might harbor.
Jerome Powell makes a return visit to Congress tomorrow, with the Senate having its chance to try to make political points. There is unlikely to be any major changes in his testimony overnight, but market players will be looking hard for something to react to.
After Powell is finished the next major catalyst is earnings season. Market players will be watching carefully to see if the narrative of a slowing economy and trade war fallout is taking hold. If there are misses to the numbers, will the market excuse them because it feels the misses will make the Fed more dovish?
There is no question that the technical action of the indexes is quite good and there is also a large supply of skeptics that can help it keep going. Stay focused on the price action and don't let the clever bears make you worry about other issues.
Have a good evening. I'll see you Thursday.