Stocks' Stunning Surge Sets the Table for Possible Fed Action Wednesday

NEW YORK (TheStreet) -- All four major indexes turned around midday to a stunning closing again after starting lower Tuesday.

The DJIA gained 100.83 points to close at 17131.97 while the S&P 500 was higher by 14.85 to finish at 1998.98. The Nasdaq gained 33.85 points to close at 4552.76 and the Russell 2000 was up 4.45 points at 1150.97.

The big winner on Tuesday was trading volume. For the first time in a long while the S&P 500 Trust Series ETF (SPY) volume came in at more than 115 million shares traded, which has been highly unusual for "up" days this year. That is a bullish signal.

However, bear in mind that the Russell 2000 is still negative for the year. That is not a bullish sign.

Why the gain today? The markets may just be positioning themselves for a dovish Federal Reserve ahead of Wednesday's meeting.

Right now 47% of stocks in the Nasdaq and 41% of the Russell 2000 stocks are down from their 12-month highs by double digits. Meanwhile, the Barclays 20+ Year Treasury Bond Fund (TLT) is up 12% for the year to date. So this bullish stock market may not be as strong as it appears.

The question now is, do we go higher from here? The Fed will have a lot to do with the answer to that question on Wednesday.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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