S&P rallies into Thanksgiving

US stock exchanges are closed today and are only partially open tomorrow due to the Thanksgiving holiday. Bad news for turkeys of course, and also potentially risky for investors as the futures markets are open for two truncated sessions. Lower trading volumes mean less liquidity, which can lead to greater volatility, so traders can’t switch off completely.

US stock indices have had a tremendous bull run since the end of October, and are close to making back the three months’ of consecutive losses suffered since the beginning of August. In fact, while the Dow and S&P are around 1% below their summer highs, the NASDAQ 100 has exceeded its own.

It is just the index of smaller domestically-focused US companies, the Russell 2000, which is lagging behind. This is another illustration of how big caps and tech are leading the bullish charge, which demonstrates the lack of market breadth. Is this a warning signal, or can we expect smaller caps to play catch-up? That is the big question as we head into year-end.

Chart-wise, the S&P has come a long way in a short time without any significant pull-back. We're certainly overdue one, but then that's been the case for a while now. If we do get something noteworthy, will all those frustrated bulls be prepared to buy in, or will sentiment turn negative again? We’re approaching the mid-point of the upwardly trending channel that has been developing since the low of October last year, but the MACD is looking a little overstretched. Time to be cautious?
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