We had a classic example of holiday trading Wednesday. The mood was positive and the S&P 500 trended higher all day, but volume was light and the action a bit slow. There were a few pockets of speculative chasing, but overall it was just calm and steady accumulation. Breadth was two to one positive and the number of new 12-month highs expanded to nearly 850. That is definitely bull market action.
The only problem is that the indexes are now even more extended. While the trend is positive, it is becoming an act of faith to keep on buying when there hasn't been any meaningful consolidation in weeks. That doesn't mean that this action can't continue, but if you're trying to put idle capital to work, it is a challenging task.
The positive seasonality continues on Friday, which is a half-day session with the equity markets closing at 1 p.m. ET. The Monday following Thanksgiving week has a history of negative returns. That is a well-known statistic and may lead to some positioning moves at the close on Friday.
This week we seem to have had buyers expecting positive seasonality on Monday, so I would not be surprised to see some expectation of negative seasonality to start on Friday.
The most positive thing the market can do is to go straight up, but it is even better if there is some rest along the way. Some sort of pullback or consolidation is likely to hit soon, but if you spend too much time getting ready for the turn, you are missing out on some nice profits. Even if we do finally see a pullback, there is now a huge supply of potential dip buyers who are anxious not to miss the next run up.
Have a great Thanksgiving holiday; look for my Thanksgiving column tomorrow.