The good news is that unless you were short, you probably started the year with some gains today. The bad news is that you probably underperformed the indices unless you started the day very heavily long. If you were holding lots of cash, it was very tough to catch up just by playing intraday.
The main driving forces today were optimism about the new year, beginning-of-the-year cash inflows and a desire to start the year with some gains. As soon as we gapped up this morning, the hunt was on for long exposure. Traders were particularly aggressive with some of the higher-beta small-caps, particularly the China-related names, but we had strength across the board and superb breadth. I'm a bit surprised we didn't have better volume, but it was higher than last week, and that is all that is needed for a technical accumulation day....
The second trading day of the year has a particularly good track record, and with many market players already lagging the indices, they will likely be scrambling for long exposure once again. This is not unusual seasonality, but it is driven by many things, most which have little to do with fundamentals. We might as well just play the game and enjoy it while we can.
Just remember that we started off last year even stronger than today with the Nasdaq up 55 points on the first day of the year, but we topped out two days later and then fell apart completely. We didn't exceed the early January highs again until April....
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