The winning streak continues, and if you aren't at least a little worried about how extended the Russell 2000 ETF (IWM) is, then you aren't looking at the charts. The folks in the business media were excited about the DJIA hitting the 19,000 level, but for serious traders that's about as relevant as Coca-Cola (KO) .
The real story today wasn't just the continued ascent and outperformance by small-caps, but the rotation. Steel, mining, minerals, retail and regional banks attracted buyers while biotechnology and oil names danced around on rumors of what OPEC might do.
Maybe it's because it's a holiday week, but the mood is very upbeat. The bears expected that the honeymoon period following the election would reverse, and instead we are being carried away on a wave of sustained momentum. It feels frothy, but if you want to be part of the action, you have no choice but to stay with the long side.
Historically, the Wednesday before Thanksgiving has a strong positive bias, but you have to wonder if this strength is setting us up for some "sell the news" type action. There are big gains to protect and with a half-day of trading on Friday, there will be some desire to pare back. The Monday after Thanksgiving has a history of being weak. We need to keep that in mind as we navigate the next couple of days.
I'm concerned about how extended the indices have become, but I'm not going to try to anticipate when it will end. I'll be focused on lower-priced speculative stocks tomorrow, but will be working hard to protect gains as well.
This rally is going to come to an ugly end one of these days, but our job is to worry about what we can do now. When conditions change, then we will, too.
Have a good evening. I'll see you tomorrow.