There has been one major technical change in the market since the Fed became uber-dovish way back in 2009. That change is the tendency toward V-shaped bounces.
We have a hawkish Fed now, but that hasn't yet shifted this dynamic. The market had its third straight day of substantial gains, and it has been pretty much in a straight line.
This sort of action creates a huge amount of FOMO (fear of missing out) and feeds on itself. Technical traders struggle as they watch oversold go to overbought in a blink and then become even more overbought.
It was another broad rally Tuesday with around 5,700 gainers to 2,600 losers, and we ended up with more 12-month highs than lows for the first time in a while. Small-caps, growth, biotech, and cannabis performed well while big-cap tech lagged a bit.
However, after the close, Alphabet (GOOGL) put up some strong numbers and then surprised the market with a 20-for-1 split. That has the stock trading up to more than 6% after hours and is causing sympathy moves by Amazon (AMZN) and others.
A 20-for-1 split would put GOOGL at a price around $135-140, which would be just about perfect for the DJIA in case it happened to dump a laggard such as IBM (IBM) .
The question now is whether this V-shaped action can keep on going. It almost always lasts longer than seems reasonable, but if you are looking for entry points, this is tremendously difficult without some sort of consolidation first.
This market is still largely controlled by big institutional and computerized flows. The difference is that they are now focused on buying rather than selling. Fundamentals still aren't given much weight, but who cares if their stock is rising?
We have some tricky action coming in the next few days, but the media will celebrate Google and will try to forget about that annoying hawkish Fed for a while.
Have a good evening. I'll see you Wednesday.
