"Only in America do people trample others for sales exactly one day after being thankful for what they already have."
Markets close at 1 p.m. ET today and the news mainly will be about Black Friday shopping, but it tends to be a positive day as traders search for pockets of speculative action.
The holiday trading on Wednesday was lackluster with the indices mixed, but small-caps were up again despite very light volume overall. Momentum has slowed a bit recently and that is preventing the indices from being too overbought, but the winning streak in small-caps is near an all-time record and that is causing many folks to look much harder for a reversal.
Markets that go straight up like this one has since the election present a classic dilemma. On one hand, strong markets tend to go higher than many people anticipate. It is very easy to underestimate the power of momentum. We were hearing a week ago that the market was frothy, but that hasn't had any impact on the action. The indices keep on running higher on strong breadth.
The dilemma for traders is that the strong momentum makes entry points increasingly difficult. It simply isn't as easy to enter a stock that has gone straight up five, six, seven or more days in a row. That doesn't mean it won't continue to go higher, but the odds of further gains in the short term are diminished. Those who have held the stock on the way up are going to protect gains when things slow, and that risk of reversal is high.
The truncated trading session today is pretty meaningless, but many traders are going to be looking ahead and doing some positioning for next week. The Monday after the holiday tends to have a negative bias, and with the indices as extended as they are the pressure for profit taking will be even greater.
One sector that will be a focus today is oil. OPEC is meeting next week and skepticism about an output cut is running high. There is a very high short level in oil, which creates the potential for a flurry of volatility on the news. Oil is drifting lower this morning as few trust OPEC to make a deal. Even if it does, expectations it will stick with it are low. The potential for a trade in this sector are high and I'll be watching for opportunities in stocks such as Resolute Energy (REN) and WPX Energy (WPX) .
Early indications are slightly positive, but trading will be thin and inconsistent. It isn't a day for big moves.