More Challenging Trading Ahead

 | Nov 29, 2013 | 1:30 PM EST
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Although it was very slow action today and we closed poorly, we did have some classic holiday trading this week. The indices keep on running, there was some speculative action in thin, small caps, Apple (AAPL) acted like it did in the 'old' days and sentiment was upbeat if not downright frothy.

It was a good week for the bulls but will the market continue to trend endlessly higher next week after the leftover turkey is gone and folks start to contemplate how they are going to pay for all that Christmas shopping?  If you believe in contrarian strategy you have to be thinking we are close to a point where things can't become much more positive.

Unfortunately for the bears contrary thinking has not worked at all this year. If you have tried to fight this market based on the idea that it is already so positive there is no one left to buy, you have been dead wrong. In fact even this rally to new highs feels nothing like what we had back in the days before we were hit by the Great Recession. Market players may be enjoying some gains but they are hardly acting reckless. In fact any talk about bubbles sounds more like sour grapes by those who missed out rather than objective analysis of an overheated market.

Things are likely to calm down a bit next week but positive seasonality continues and you can bet that the bulls are going to be looking for a Santa rally to take us even higher. The market is acting fine but putting new money to work is the big challenge. A little bit of a rest would be a good thing for stocks as well as many traders who are tired from the holiday festivities.

Have a good weekend and get some rest. We should have some good opportunities but the trading is likely to be a bit more challenging.

November 29, 2013 | 10:07 AM EDT

Time for Some Selling

  • I find it mentally beneficial to sell down and reset periodically.

We have exactly the sort of action you'd expect on the day after Thanksgiving. It is slow and lazy, but with a generally positive attitude.

No one seems in a rush to do much, but we are slowly walking up to new highs once again. Breadth is perky with 3,200 gainers to about 1,650 decliners. Gold, shipping and biotechnology are leading, while solar energy is the big loser.

I'm cleaning up some positions by selling into strength. There really is nothing wrong with the action and the momentum is showing no signs of slowing, but it has been a good run and I find it mentally beneficial to sell down and reset periodically.  With the generally tendency for Monday to be a weak day, it seems like a good time to do some selling.

There are a few things I like and am inclined to add to such as Quantum Fuel Systems Technologies Worldwide (QTWW) and Fonar (FONR) but I'm not going to be too aggressive. The trading is only going to slow as the day winds down.

November 29, 2013 | 8:00 AM EDT

Don't Be Hasty to Predict Market Top

  • Being too bearish, too quickly is usually a mistake

The odds of going to the store for a loaf of bread and coming out with only a loaf of bread are three billion to one. -- Erma Bombeck

After the Thanksgiving holiday no one feels like working, but we have a half-day of trading which will be filled with reports about how great the Black Friday shopping has been.

Every year we hear about how there is a huge jump in sales but the final numbers for the shopping season end up not even close to what is breathlessly being reported today.

The shopping stories are a good distraction for the media because it is likely to be a quiet day of trading. We do tend to have a positive bias but it is going to be thin and choppy. One very important thing to keep in mind is that the Monday following Thanksgiving has a tendency to be quite negative, so it is important to review the small-caps you might still be holding as we wrap up 'holiday trading' today.

The big market picture remains the same overall. We continue to slowly and steadily walk up as if we don't have a worry in the world. Overseas markets have been plugging along and the words 'new all-time highs' are being used extensively.

As I've often commented, markets that are at their highs don't just suddenly fall apart and go straight down. When we have action like this the worst thing you can do is to keep on predicting a market top. We may eventually see some topping action, but being too bearish, too quickly has consistently been a mistake. The bears haven't been able to learn this lesson, but that is part of the reason we so often have this one-way market action.

Unfortunately, this slow, steady positive action doesn't give the pundits much to talk about, so they are more inclined than usual to predict some dire events. Too many pundits are more worried about attracting attention than they are about being right and that leads to a lot of bad market analysis.

We have a positive open on the way, little news flow and lots of chatter about the crowds at the stores. I'll be looking for a few quick trades but if nothing much shows up I'll probably reduce some of my inventory.

Be careful. It is going to be thin and choppy and, most importantly, we close at 1 p.m. ET.



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