It was a good old-fashioned Monday morning gap, and then the dip-buyers showed up for the party and helped to prevent some midday weakness. That gave us a strong finish and the eighth positive day out of the last nine for the S&P 500.
The momentum has been quite strong lately, and that is why the overbought conditions haven't mattered so far. Today it felt like we also had some performance anxiety kicking in. With this straight-up move, there aren't as many easy entry points, so if you are trying to make up some relative performance, you will have to pay up and will likely want to be looking at the bigger movers. Many of the biggest percentage movers are small-caps, and that is why we saw the Russell 2000 gain almost twice what the S&P 500 gained today.
Technically, the major indices all cut through their 200-day simple moving averages. I didn't expect that it would come so quickly or so easily, but those levels now become our first area of downside support. We are extended and could use some consolidation, but a lot of market players are move worried about being left behind than they are about paying up too much.
One of the hallmarks of the rally from March 2009 through April 2010 was how often we'd have these V-shaped rallies where we just went up day after day, often on light volume. Since April, overhead resistance has mattered much more in but this past couple weeks we have cut through it like butter.
The bulls have the momentum and have leaped some pretty substantial overhead resistance levels, but unless they consolidate a bit, they are going to need to pull off a V-ish move, which is never something we can trust all that much.
It continues to be a good market for individual stock-picking.
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