Why Investors Will Have to Work Harder to Find Opportunities in December

Despite the favorable odds, the holiday trading session proceeding Thanksgiving didn’t produce a positive day this time for the S&P 500. However, there was some fairly strong speculative action under the surface.

Due to strength in smaller stocks, breadth was positive with about 5,350 gainers to 4,100 losers, but the Magnificent Seven names struggled with a loss of nearly 1%, and that hurt the major indexes.

There was a long list of small stocks with upside moves of more than 10%, and over 750 names hit new 12-month highs. Still, the media tends to overlook the action in smaller stocks, and that contributed to a more somber mood.

Economic news was mixed with some signs of sticky inflation but was offset by stronger growth. Bonds were higher, but the dollar fell. Odds that the Fed will cut by a quarter-point on December 18 are now at around 66%.

Bitcoin IBIT rebounded sharply as aggressive dip buyers stepped up. While there are some vocal bears trying to call a top in the crypto sector, conditions are good for continued strength regardless of how equities may do.

The primary theme of the market for several weeks now has been rotation into smaller stocks and aggressive speculative trading. That produces a higher level of volatility, but it has also been a great environment for stock pickers with shorter time frames.

Next week, this theme will be tested when the holiday celebration ends, and there will be more focus on economic matters. Many market players see the relative weakness of the Magnificent Seven as a warning sign of a market that needs a rest, but it appears to be a necessary condition for a healthier market with a better valuation.

The likelihood is that December will be a month that favors active trading of smaller stocks. Keep a positive mindset and work a little harder at finding trading opportunities.

Don’t forget we have a half-session on Friday.

Best wishes for a relaxing and enjoyable Thanksgiving.

At the time of publication, Rev Shark was long IBIT.