After the market has a big day, as it did on Monday, the best thing it can do is to hold close to flat and consolidate gains. That means letting those who were looking for fast flips exit and those who were hesitant to chase ease in. As the base of shareholders turns over, the market builds a foundation from which it can move higher.
The timing of this action is fortuitous because it provides a good setup for the generally upbeat action that usually surrounds the Thanksgiving holiday. Every year, hot-money traders seem to find a few thinner stocks that can aggressively run up. It makes for a positive mood and other stocks tend to benefit as well. I'll be looking to aggressively trade a few small-caps tomorrow.
Overall, the big picture looks better but we can't let our guard down if the market starts to slip again. The key now is for the market to stay above recent lows. As long as it does that, we can build the support needed for a more energetic thrust to the upside. Seasonality is working for us and the news flow is a bit better now that the politicians have promised they will deal with the fiscal cliff.
I'm not convinced yet that that this correction is over, but I am comfortable that we will see some positive action in the near term. Next week we will likely have to grapple with the news flow again, but for the rest of the week, holiday cheer should be in the air.
Have a good evening. I'll see you tomorrow.