Holiday Trading Is Here, But Inflation News May Complicate Matters
A surprise PCE report could easily upset positive seasonality. Here are three stocks I'm watching on Thankgiving Eve.
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The Wednesday before Thanksgiving is historically a positive day for the stock market. It might be due to holiday spirit or a lack of bearish sentiment, but since 1950, the S&P 500 has been positive 77% of the time on Thanksgiving Eve.
It is important to recognize that positive seasonality is not a certainty. It is a tendency, and the outcome will vary greatly depending on market conditions. In addition, the indexes may not do a very good job of reflecting the underlying action.
The technical setup this year is challenging. Market participants have been on a rampage following the election, and speculative trading and Bitcoin have surged. It has been so hot that there is already a high level of froth, and if someone is playing momentum, then they are likely to have very short time frames.
An added complexity this year is that there is some substantial economic news. In addition to weekly unemployment claims, personal income and spending, and durable goods, the PCE inflation news will be released. This is the Fed’s favorite measure of inflationary pressure and will likely have an influence on the rate-cut decision at the next Fed meeting in December. Currently, there is about a 66% chance of a quarter-point cut, but that has been jumping around due to President-elect Trump's tariff policies and growing concerns about inflation and growth.
A surprise PCE report could easily upset positive seasonality, but even if that does occur, traders will hunt for big moves in small stocks. This holiday trading is often self-fulfilling as traders pile into "junk" names that see early surges in price and volume. A few examples I’m watching today are AMC Entertainment AMC, Rigetti Computing RGTI, and Eastman Kodak KODK.
There is a half trading session on Friday that will have very thin volume and also attracts similar holiday trading.
The most important thing to watch for is positioning by bigger players for next week, when the economic news and the upcoming Fed meeting will take on much more importance. There is some rotational action out of the hottest stocks and consolidation, but aggressive traders are still pressing.
We have minor weakness in front of the PCE inflation news at 8.30 a.m. Once that is digested, traders will be looking for trading action in smaller speculative stocks.
At the time of publication, Rev Shark was long AMC and KODK.
