As stock traders take a break for Thanksgiving, all the major averages have hit new highs after breaking through psychological resistance levels, including the S&P 500 at 1800, Dow Jones Industrials at 16,000, and NASDAQ at 4000. Tech stocks were the big leaders on Wednesday after a strong earnings report from Hewlett-Packard (HPQ).

The market went through some gyrations on Wednesday in reaction to Fed Chairman Bernanke’s testimony before the Joint Economic Committee. He first defended continued quant easing by warning, “A premature tightening of monetary policy could lead interest rates to rise temporarily but also would carry a substantial risk of slowing or ending the economic recovery.” Stocks dutifully rallied and all major indexes hit new intraday highs.

Proceed with Caution

The market is off to a great start this week, powered by last week's momentum and further buoyed by a lessening of fears about Europe's sovereign debt. All the major indices are above their 50-day and 200-day moving averages, with the S&P 500 finally breaking out of the 1120 resistance level, closing today at 1141, a new 4-month high. As an interesting historical aside, the 1120 resistance level was first encountered way back in April 1998.

The low-volume “dog days of summer” have been anything but uneventful. Rather than a sleeping dog, this summer has been more like a rabid dog—gyrating wildly and scaring the heck out of everyone in its path.

As we wind down the summer doldrums, are we heading toward another low-volume August?  Today was one of the lowest volume sessions of the year on the NYSE. Kids are returning to school in some parts of the country already, and many portfolio managers and traders will begin returning to their desks. But what they are finding in the market this week is quite different than they would have seen last week.