The market action started slowly on Tuesday morning but picked up steam and had a holiday feel as the day progressed. Buying accelerated in the last hour of trading, and the indexes closed at the highs of the day as traders anticipated more holiday trading on Wednesday. Concerns about Covid in China contributed to a soft start, but strong earnings in the retail sector from Best Buy (BBY) , Burlington Stores (BURL) , and Abercrombie & Fitch (ANF) helped to create positive sentiment.
Breadth was solid as it approached three-to-one positive, but the pockets of momentum were relatively narrow for this level of strength. This typically indicates that the action is more index-driven rather than stock-driven. There were nearly 300 stocks hitting new 12-month lows so there were some pockets of weakness as well.
Bonds were strong, oil bounced, and the dollar weakened, which helped to offset more hawkish Fed chatter. Fed members should be finished for a few days now, so that obstacle is over.
It is likely that the action was caused in part by the front-running of known seasonal strength that takes place on the Wednesday before Thanksgiving and the Friday after. That doesn't mean that the bounce won't continue, but it does set up a strong inclination to take some profits before the traditionally weak Monday that follows Thanksgiving Week.
The great thing about holiday trading is that worries and concerns are temporarily set aside, and the positive mood attracts more retail traders looking for some fast trades. It can be volatile, but if you can catch the right stocks, it can pay well.
The bulls don't have too many obstacles in front of them tomorrow, but we are still deeply buried in a bear market, and conditions can change very fast, even without any major news.
