The conditions were good for some holiday trading today, but few expected such robust action. All the major indices jumped to all-time highs, breadth was better than 2-to-1 positive, new highs jumped to over 500, but what was most notable were the pockets of momentum.
On my screens, I have over two dozen names that were up more than 10% today and many, many more up over 5%. This was a momentum rampage in many places. Names like Overstock (OSTK) , Phoenix New Media (FENG) , Riot Blockchain (RIOT) and GW Pharma (GWPH) stand out, but there was strength across the board.
The catalyst for this is a combination of good technical setups and the positive sentiment of holiday trading. The two reinforced each other and caused this dynamic action.
The bears are doing their best to call this a contrary indicator because if feels so frothy in places, but trying to time a top in this market on that basis is very difficult.
In my morning column, I mentioned a study by QuantifiableEdges.com that found that when the market closes strong on the Tuesday before Thanksgiving, there is less chance of positive action for the rest of the week. This is a recent phenomenon, but the theory is that there is too much anticipation, and that sets up some profit-taking.
At the close today, the momentum was very strong and that bodes well for follow-through tomorrow. This is a market where it is very easy to feel left out. There is some desperation to put as much capital to work as possible.
The hardest thing to do in a market like this is to stay with the momentum. The biggest mistake traders tend to make is selling too early. I did that myself today, but what is even worse is trying to guess at market tops. Ride that momentum to the bitter end. You can rack up big enough gains at this juncture that you can handle the losses that come when a turn finally does occur.
This is holiday trading and only lasts a short time. Enjoy it while you can.
Have a good evening. I'll see you tomorrow.
