Monday and Tuesday of Thanksgiving week are typically quiet before the positive sentiment kicks in on Wednesday and the half-day on Friday. This week has been an exception so far, with some very robust and positive action on Monday.
The market has been acting in a positive manner recently as it hovered around all-time highs but with narrow leadership, few new all-time highs and mediocre breadth. Apparently this action served as healthy consolidation and provided a foundation for a strong move on Monday. Breadth was quite good but was most interesting is that small caps (IWM) and some of the high-beta names were leaders. The Innovator IBD ETF Leaders (LDRS) is a good way to see how high momentum names are looking.
It is particularly interesting that this robust bullish action hit as more and more market players are grumbling about some sort of corrective action. Many bulls wanted a pullback in order to set up better technical conditions for a year-end run, while the bears just are tired of constantly fighting a market that can't seem to pull back for more than a few minutes.
The S&P 500 had three minor red days last week, but that seems to be all the rest it needed to set the stage for new all-time highs. Obviously, at this point the concern is that the indices and many individual stocks are extended and have not formed healthy charts since consolidation is so limited.
The irony of this action is that it creates even more fear of missing out and makes it less likely that there will be the sort of technical action needed to form better charts. One trader commented yesterday that if you wait for perfect entry points, then you aren't going to be buying much right now.
In a number of ways, this is "climbing the wall of worry" action. When the market climbs a wall of worry, the dynamic is that there is some concern that keeps money on the sideline, but when that worry doesn't seem to matter then that capital is slowly put to work and that keeps the indices trending higher.
That dynamic is currently at work now, but the worry isn't the economy or China or anything fundamental. The worry is that this market will just keep going higher and never let us put our idle capital to work. The bears will tell us that this market is ignoring every rational negative argument, but how do you deal with that and still try to keep pace with your benchmarks? The only choice is to join the party to some degree.
We have a quiet open on the way, but watch for the dip buyers to jump in very quickly if there is some downside action. I'll be looking for some new buys and protecting recent gains. I still see no reason to start anticipating disaster.