Now That's A Rally

For once, I accepted the strong open for the market, and it turned out to be a good thing.

The SPX rose +2.2%, the COMP gained +3.0%, and the RUT spiked +3.8%. That qualifies as a nice rally. And volume levels also rose.

I'm sure IBD will now call this a follow-thru rally, though they will likely lament that it came on Day 12 or something like that. Readers of this site know that I called last Wednesday's rally a follow-thru rally, due to the RUT (small-caps) gaining +1.9% that day.

Since the RUT had been the leading index all year, I think it makes sense to focus on that index (as opposed to the COMP) for clues to renewed strength. As such, today's rally is really just another confirmation rally.

I think many market participants were worried that the Fed might use harsh languange in its statement. But I think the Fed did a good job acknowledging that the economy, and the housing sectors, has started to cool. And also that inflation may not be all that worrisome at this point either.

That sparked an additional wave of buying, and things just continued to build from there. I suspect that the large short contigent in the market were scrambling to cover their short positions. They have been making a lot of money recently, but a couple days like this and they risk giving back those gains and ruining their performance.

The 10-year yield also plunged, falling nearly 5 basis points to 5.20%. But oil rallied, and should be watched to see if it breaks out to new highs also.
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