Small Caps Offer Some Holiday Sparkle

The upside momentum slowed on Monday, but market direction remains positive. All the major indexes finished with gains, with the big-cap technology names leading the way. Breadth was 4,900 gainers to 4,400 decliners, but the number of new highs was around 830 names. It wasn't a rampage like we saw last week, but it was confidently positive, with only one minor dip that was bought and a tight trading range all afternoon.

There remains a large contingent of bears who are still trying to catch a drop due to overbought conditions, but no one seems to be rushing to take profits or reduce exposure. If anything, they would like to add more, but the dips are far too shallow so far.

The biggest positive I see is continued positive action in small caps and secondary stocks. This was not one of those days when the "Magnificent Seven" moved higher, while everything else dropped. There was still an appetite for riskier names while the "safe" big caps chugged higher.

I remain optimistic about end-of-the-year trading and some "January Effect" plays. But there is almost always a day or two of sharp selling at the end of the year. That may not occur until after Christmas, but don't be surprised if there is some sudden repositioning action in key names.

The action in small caps feels like the old days in many ways, but the action at the end of the year can shift quickly. It has been a very long bear market for small caps, but there has been a major shift in the last week or so.

Have a good evening. I'll see you tomorrow.

At the time of publication, DePorre had no position any security mentioned.