It was a pretty typical day of holiday trading. Small-caps exhibited good relative strength, breadth was solid and we held steady. Volume faded as the day progressed, but that didn't have much impact on the price action. There was some trading action in some thinly traded names, but overall it was fairly sedate.
We have a half-day of trading on Friday that will be extremely thin and then we are back to normal on Monday. The indices are becoming overbought on decreasing volume and I expect the top callers to grow much more active next week. We have had a slow and steady upward drift ever since the Paris terrorist attack and the bears have been champing at the bit to try to call a turn.
There is nothing particularly great about the recent news flow, which has confounded both bulls and bears, but it is the sort of contrary logic that so often keeps the market moving. The upside may look limited here, but it is not easy to fight.
As I mentioned in my Thanksgiving column, I'm going to be out of town for a few days. Have a great Thanksgiving and I'll see you next week!
Nov. 25, 2015 | 10:40 AM EDT
Getting That Holiday Trading Feeling
- Expect an increase in randomness amid thin volume.
Trading around Thanksgiving always has a different feel. Traders are very focused on finding some speculative small-cap that is in play. We expect that there are going to be a few fast moving "junk" names, and traders make it happen in their zeal to find action.
There's relative strength in biotechnology again while oil and precious metals lag. Volume is already a bit slow but the big-cap speculative names look OK. I'm a bit concerned that traders will make their exits as the day progresses. They have had a good run over the last week or so and may be inclined to lock in gains before the holiday.
I'm disappointed with the failure of several speculative names to follow through, but traders are going after names like Zogenix (ZGNX), Macrocure (MCUR), Genetic Technologies (GENE) and Cancer Genetics (CGIX). Small-caps are outperforming again and breadth is running slightly better on Nasdaq. It is typical holiday trading, but a bit light on the number of opportunities.
MaxLinear (MXL), which I've mentioned a few times, continues to act well and I like the looks of Achillion Pharmaceuticals (ACHN) as well. I'm going to be out of town for a few days so I'm not doing too much.
Please note that due to factors including low market capitalization and/or insufficient public float, we consider ZGNX, MCUR, GENE and CGIX to be a small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.
Nov 25, 2015 | 7:12 AM EST
How Much Positive Sentiment Is There in This Market?
"I am grateful for what I am and have. My thanksgiving is perpetual."
--Henry David Thoreau
European stocks are trading in positive territory as fears over the Russian-Turkey situation cool and hope of more stimulus action by the ECB gains traction. Oil prices have reversed back down and early indications are that the U.S. is looking for a positive open.
You have to wonder if the lack of anything overtly negative is bad news for the market. We have done extremely well lately when we had bad news that has created an opportunity for the dip buyers. They have not been at all concerned about the headlines. We have shrugged off terrorism, weak consumer sentiment, a struggling economy and just about any pessimistic argument the bears can throw at the market. The buyers have been lined up and ready to buy, and that is all that matters.
With the Thanksgiving holiday in front of us and volume ready to slow substantially, you have to wonder if maybe the contrary nature of the recent market action may kick into reverse. The days surrounding Thanksgiving tend to have a positive bias, but the action the last couple days had the holiday feel and you have to wonder if we have depleted our supply of positive sentiment a bit.
As I've discussed quite a bit lately, the most notable aspect of the market recently is its stunning lack of logic. We have completely ignored some of the most negative international events in quite some time. Buyers have seen any and all setbacks lately as just an opportunity to put money to work.
The bears have an extremely strong argument against this market right now. While seasonality may not favor the bearish case, there are substantial issues with international affairs, the economy and corporate earnings. The technical condition of the indices isn't bad, but the underlying action has been mixed. We have had a very narrow market and yesterday we had only about 130 stocks making new highs, even though the indices are not that far from all-time highs.
The great challenge of the market is that the normal, logical relationships between news flow and price action just don't exist right now. What is driving price are structural issues rather than fundamentals or news. In fact, the more negative news we have, the more anxious the bears seem to be about buying.
The fact that there isn't anything obviously negative today may actually favor the bears. We don't have the automatic dip-buying, and there aren't the overanxious shorts to squeeze. There is no question the market is ripe for a pullback or consolidation, and we'll see if the bulls step aside and let it happen.
Keep in mind that the day before Thanksgiving is often a favorite for speculative traders looking for action. We often have big moves in a number of small cap names. It is self-fulfilling to a great degree, as traders expect it to happen and focus on a small group of stocks. I'll be looking for unusual movement this morning to signal the stocks that may be in play.
Don't go too crazy trying to find holiday action. There can be some landmines, and there is no guarantee of positive sentiment. It is going to be thin, and that means randomness increases.