This can be a very highly effective rally. The mixture of surprisingly sturdy financial reviews and much more surprisingly sturdy earnings reviews is pushing broad swaths of the U.S. inventory market to new highs.

Even the technicians who chart momentum are impressed.

“The overwhelming majority of NYSE shares are in intermediate-term uptrends, unbiased of short-term pullbacks and volatility,” Michael N. Kahn of Lowry Analysis, the oldest technical evaluation service within the U.S., wrote in a be aware to shoppers.

In fact, the market hit new highs in January and February, however this, time it is completely different. Earlier new highs in January and February have been greeted with some hand-wringing: It was principally big-cap tech shares that have been forcing the markets increased.

Not this time.

The rally has broadened out, huge time. Much more shares are advancing than declining. Almost one-fourth of the shares within the S&P 500 and the NYSE Composite Index are at new highs. Not too long ago, laggard teams like utilities, well being care and REITs have been outperforming prior leaders like know-how and industrials.

Worth is at a brand new excessive. Progress is at a brand new excessive. Massive caps are at new highs, midcaps are at new highs. The small-cap Russell 2000 is lagging barely, 4% off its excessive, however nobody appears to be complaining an excessive amount of.

The excellent news is {that a} main breadth advance is bullish for the markets.

The unhealthy information is — nicely, merchants aren’t certain what the unhealthy information is, or whether or not the previous guidelines even apply.

One characteristic of the market this yr is that if one sector lags (like know-how), different sectors come alongside (like vitality, banks or industrials) that proceed the rally, so the S&P stays on principally an upward trajectory.

However now, every part goes up.

“The online of all of it is that towards the drop-dead good technical numbers, it has been onerous to lose cash, no less than lots, however not all that simple to earn a living,” Frank Gretz of Wellington Shields mentioned in a be aware to shoppers, noting that when every part is up, it is onerous to earn a living as a dealer rotating out and in of shares: “Now the one factor operating persistently is the S&P 500.”

That seems like an odd downside: We’re operating out of locations to rotate into. However for energetic merchants, it is a critical problem.

“There is no Covid low cost anymore,” mentioned Peter Tchir, head of macro technique at Academy Securities. “There is no apparent sector the place it seems to be like the remainder of the market has ignored the area. I am undecided if we must always simply be 50% in money and simply determine what will get mispriced within the subsequent week or two.”

The market is now going through a really giant group of shares — not simply know-how names — which might be rising quick and which have expectations that earnings are going to be rising quick. And which may be the place the resistance begins.

“Most corporations usually are not reacting nicely to earnings,” mentioned Alec Younger, chief funding officer at Tactical Alpha, noting that financial institution shares barely budged final week regardless of reporting income nicely above expectations. “Shares are operating nicely going into earnings. What’s not clear to me is whether or not they can keep momentum as soon as the earnings have been reported.”

Then there’s the Fed downside — with financial development nicely above expectations, it is solely a matter of time earlier than the Fed turns into a problem, because it was in February.

“Buyers need it each methods — they need sturdy development however they do not need the Fed to taper [buying bonds],” Younger mentioned. “The Fed isn’t going to take a seat on their palms with this sort of development, they are going to should no less than taper” someday later this yr, Younger mentioned.

Tchir agrees, noting that costs have moved so quick it is possible one thing goes to offer.

“We’ve got priced in nice financial development, average inflation, and a perception that yields are beneath management,” Tchir mentioned, noting that current reviews that the Japanese have been shopping for U.S. bonds have helped drive down bond yields. “If a kind of legs give means, we’re going to have a pullback.”