Power outages caused by the hurricane this weekend kept volume very light, but the storm must have disproportionately affected the bears. The bulls were in charge all day, and the buying was tremendously lopsided, with breadth better than 7 to 1 positive and a huge move in the small-cap indices.
What was particularly interesting about the action today was that there were hardly any pullbacks at all. We gapped up to start the day and never looked back. We even finished at the highs on a little burst of volume.
This sort of action is indicative of high-frequency trading. The computers just keep on pushing as they extract their fraction-of-a-penny profit on the move. It is a lot easier to push the market in a straight line once it begins to move, and we saw a good example today.
It was downright humorous to hear all the attempts to explain the action today. Take your choice from window-dressing, Greek banks, hurricane relief, too much negativity, Ben Bernanke, high-frequency trading and so on.
Technically, the bulls even managed to break through last week’s high, which looks good but is undermined to some extent by the low volume. You can almost hear the bears muttering about how this is setting up as a bull trap, but these moves have proven to be bear-killers more often than not.
It is tough to believe that the bulls can keep this going without some sort of rest, but they have done it before. In fact, this action feels a lot like the move we had back at the end of June, which everyone thought was window-dressing but went a few more days before it topped.