"I approximated the Black Friday experience at home by hurling myself into a wall a number of times and then ordering online."
It is Thanksgiving week, which means there are only three and a half days of trading, but there are a couple of things we can count on to happen.
The first is that there will be endless stories about holiday shopping. There will be a reporter stationed in a busy mall and shots of people carrying bags. All the comments will be upbeat and there will be very optimistic projections about retail growth. This year we'll have the addition of the election results to give commentators a twist.
The other, far more interesting event, will be that traders will be looking for "holiday trading". It doesn't always happen and it may be more a self-fulfilling prophecy than anything else, but traders always expect strong speculative action stocks around the holidays. It is explained as a function of more senior traders taking a break and shorts stepping aside, but it may simply be a more positive mood as market players look forward to a holiday.
Many traders are already digging for lower-priced, thinly traded stocks that have the potential for big moves. If they have a big short interest and an interesting story, it is even better. Once something begins to move, there will be plenty of traders happy to jump in for a quick ride.
We already had a taste of this last week with the bulk shipping stocks. It wouldn't be a surprise to see some of the big movers like Diana Containerships (DCIX) or Globus Maritime (GLBS) attract interest again.
One group I will be looking at very closely for some holiday action is small-cap oil-related stocks. Oil is ramping up in anticipation that OPEC may agree on oil production curbs. Vladimir Putin stated that he believes there is a "high probability" that an agreement will be reached in Vienna when OPEC meets on Nov. 30.
The United States Oil Fund (USO) , which tracks the price of crude, is up sharply this morning and is poised to challenge overhead resistance at its 200-day simple moving average. There are some decent technical setups in small oils, as they have been under pressure in part due to strength in the dollar which is reversing this morning.
The other big issue this week will be that the overall market is overbought. Many trades have been hoping to catch a reversal, as the strong emotional reaction following the election cools off. We have had a honeymoon period that few have foreseen and by many measures it has gone too far, too fast. Of course, we always have bears trying to predict a top and they are always far too early with their pessimism, but that won't stop them from trying.
The key for traders this week will be to focus on sector action. We have had a rolling rotation since the election, with different groups stepping up at different times. Initially it was biotechnology IBB and financials KBE, then it was technology and chips SMH and now we are seeing movement in commodities and oil.
It should be a good week for stock pickers, but we will still need to navigate some bigger rotational themes and focus on the best groups. Oils and commodities should hold the most potential.
Analysts will be quiet this week, but early indications are positive and the mood is upbeat once again.