By Angela Moon

NEW YORK (Reuters) - Wall Street set another record this week, and the rally that has taken the S&P 500 index nearly 30 percent higher for the year shows no sign of losing steam as Americans prepare to celebrate the Thanksgiving holiday.

Supporting this scenario, December is historically the strongest time for stocks.

Trading volume is likely to be light as U.S. stock markets will be closed on Thursday for Thanksgiving and open a half-day on Friday.

The Dow closed above 16,000 and the S&P 500 above 1,800 for the first time this week, but rather than being anxious about a pullback or a correction, investors are afraid to miss the expected Christmas rally.

"The market finally feels comfortable about not having a meaningful correction (this year), that it's OK not to, as we enter a traditionally strong time of the year," said Ryan Detrick at Schaeffer's Investment Research.

The CBOE Volatility index VIX (^VIX), Wall Street's so-called fear gauge, is around 12, a calm zone considering that Wall Street has recorded seven consecutive weeks of gains.

Analysts say with most of the year's big events, like third-quarter earnings, out of the way, there is little to curb investors' risk appetite. The market is not expecting a surprise from the U.S. Federal Reserve's December meeting.

Investors are skeptical over the prospects for a December tapering of stimulus, preferring to focus on March as the starting point for a reduction in the flow of Treasuries and mortgage bonds bought by the Fed, said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co.

"A Santa Claus rally appears on the cards," Wilkinson said.

While short-sellers are taking out greater positions betting against the U.S. market gains, they are doing so in less traditional sectors, according to SunGard's Astec Analytics.

The number of U.S. shares being borrowed - the prerequisite for short selling them - is on the rise, but when broken down by sectors, "the image is perhaps not what we might imagine," said Karl Loomes, market analyst at SunGard's Astec Analytics, in a note to clients.

Classically when investors expect a stock market turnaround, whether for the better or worse, high-beta stocks such as information technology companies are the first to see action.

But over the last two months, the areas where traders have been betting on declines have been energy producers and metals and mining, with the number of shares borrowed up more than 20 percent for both sectors. Energy and mining sectors are more dependent on the world economic outlook, far beyond the shores of the United States.