Small-Caps on the Move

 | Nov 26, 2013 | 4:32 PM EST
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The indices were plugging along very slowly and steadily once again, but a late sell program hit hard and pushed the senior indices back to flat. The Nasdaq held up relatively well, but that sort of action is a good reminder of what can happen as trading thins around the holiday.

What was most notable about the action today was how the speculative action in low-priced small caps picked up. There is a great amount of chatter about "holiday trading," and traders are beating the bushes looking for "thinsters" that might run. I have a long list of names under $10 that are quite active today, such as Echo Therapeutics (ECTE), Fuel-Tech (FTEK), Global Eagle Entertainment (ENT), Tonix Pharmaceuticals (TXNP), Zogenix (ZGNX), Camtek (CAMT), etc.

Generally, these are not quality names with great balance sheets, they can also move in this environment, and that is what traders are focused on.

Overall the major indices continue to hold up well. It is thin trading, and obviously the computer programs can jerk us around, but I'm sure in no hurry to try to short this sort of action. We should have more speculative action tomorrow, but it is going to be very thin by the time we close.

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

Nov. 26, 2013 | 1:24 PM EST

Lots of Junk Out There

  • Be careful trading low-priced names.

The trading is slightly better today but I'm running out of ways to describe how slow this market has been. If the underlying action were weaker, we could shrug and find something better to do, but this action is producing small-cap movement and we have to keep digging to find opportunities. There is a lot of "junk" on the radar, but that is what's in play.

One important thing to keep in mind when you are trading junk stocks like Camtek (CAMT) or some of the small biotechnology names is that fundamental are mostly irrelevant. What you are trading here is the emotions and psychology of other traders. Around the Thanksgiving holiday, traders are more likely to be aggressive with some of these low-priced names because they think other traders feel the same way.

The important thing to keep in mind is that these are very short-term trades, and if they don't act the way you like, sell first and ask questions later. This is a slow but positive market, and we just have to take advantage of the opportunities while we can.

Nov. 26, 2013 | 11:14 AM EST

Low-Priced Stocks on My Radar

  • I'm looking for speculative small-cap action.

One thing you can say about this market lately is that it's consistent. It's another day of extremely slow action with a generally positive bias. Breadth is running 2,800 gainers to 2,350 losers and indices are slightly positive. Homebuilders are leading while oil and solar energy lag again.

While I don't believe the indices are going to do much, I'm still looking for speculative small-cap action. Traders I know are digging deep for "holiday trading" candidates and the likelihood is that they will create some action. Trading of this sort is often self-fulfilling as the momentum money sloshes around looking for a place to go.

Some of the low-priced stocks on my radar include Camtek (CAMT), Unilife (UNIS), Extreme Networks (EXTR), Zhone Technologies (ZHNE), Quantum Fuel Systems (QTWW) and Tonix Pharma (TNXP). I'm sure others are going to pop up so we need to stay awake, which may not be easy to do in this extremely dull market.

Nov. 26, 2013 | 7:37 AM EST

Keep Your Focus Off the Averages

  • There's still no reason to predict any market collapse.

Speculation, like nature, abhors a vacuum.

--Baruch Spinoza

Sometimes the most challenging markets to trade are those that are acting fine.

In a recent column Jim Cramer notes, "This bull is real." While that may be the case, it hasn't been a particularly easy market to aggressively attack. Stocks have held up extremely well, but many are churning and stalling as the indices meander near all-time highs.

While the averages haven't had much energy, the mix of action in leading stocks is what's making the market particularly tricky. Groups that led earlier this year -- like social networking, oil and solar energy -- are struggling while atypical leadership groups like financials and consumer staples are stepping up.

The bulls just shrug and call it a healthy rotation, but this is not the sort of sector action that suggests a continued run. On the other hand, we are entering the strongest time of the year seasonally, and with so many active money managers doing poorly, there is likely to be strong underlying support to hold up this market.

My primary advice here is not to focus too much on trying to time the major indices, as you can waste a tremendous amount of time and energy trying to assign a bullish or bearish label. While the market action is far from perfect, it isn't flashing any major warning signs. At the moment, there is just no reason for anyone to predict a sudden collapse unless they are frustrated and underinvested and just being hopeful.

Far too many market players allow their view of the market to be colored by subjective factors. Personally I'm having a hard time putting new capital to work, but it would be a mistake to use that as a reason to suggest that the market is going to suddenly reverse. I sure wouldn't mind some downside action to create new opportunities, but you can't let hope drive your market view.

On the Wednesday and Friday surrounding Thanksgiving, trading tends to have a clear positive bias, as this study shows. Traders are very aware of this tendency, and they look to benefit from it by focusing on fast-moving small-caps. The belief is that the "big boys" are away from the desks and that, therefore, aggressive traders will be free to gun some junk stock. Keep an eye on Camtek (CAMT) as an example of the sort of thing onto which traders latch.

My game plan is to not pay much to the big picture, but to focus on some small-cap trading. I am not going to be able to put money to work for the longer term, but I strongly suspect that traders are more anxious than normal to find some speculative small-caps to push around -- and I plan on joining the party if I can. When the indices are doing little, traders are likely to gravitate toward small-cap speculation.

A slightly negative open looks to be setting up for Tuesday, but the indices aren't where the action is.

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