Expectations about "Black Friday," when Americans traditionally get serious about holiday shopping, could sway stocks this week if it looks like the economy will get a pop from consumer spending.
The outcome a bailout for Ireland could also move stocks, analysts said, but they cautioned that other highly indebted euro zone countries could still be a source of worry.
Ireland is asking for a multibillion-euro international bailout of its crisis-hit economy, a move the country's finance minister said Sunday would help shore up the country's finances and guarantee its catastrophically indebted banks.
Even though light volume will define trading during the holiday-shortened week of the U.S. Thanksgiving Day on Thursday, investors will watch to see if retail sales appear strong enough to give the market a Santa Claus rally.
The lighter-than-average volume expected this week could lead to exaggerated moves in the market after a week of sharp losses and advances.
Further gains would resume an up-trend that began at the end of the summer, with the Standard & Poor's 500 index up 14 percent since August 31. The market ended last week little changed and suffered losses the week before.
"Bullish sentiment toward holiday sales is the most likely catalyst for the cyclical bull market to resume, so a lot rests on that," said Chris Burba, a short-term market technician at Standard & Poor's in New York. If sales seem weak, "this dip could turn into something bigger."
Retailers have been optimistic in their forecasts for holiday sales, and investors will want to see evidence to support those forecasts as worries about consumer spending weigh on the economic outlook.
At a rate of 9.6 percent, unemployment is seen as one of the biggest drags on the U.S. economy,
Target Corp last week was the latest retailer to give an upbeat forecast, saying it expects to post its best same-store sales in three years during the period.
The day after Thanksgiving traditionally marks the start of the holiday shopping season and is called Black Friday because retailers generally make enough sales to get their accounts into black ink.
Shoppers are expected to flood stores in search of bargains while retailers fight for their share of those sales. Target, for instance, is using a built-in discount for shoppers who use its store credit card.
"It's a very competitive retail environment ... a sign people are slugging it out" for every last sale, said Sasha Kostadinov, a portfolio manager at Shaker Investments in Cleveland.
With the recent market weakness, the S&P 500 has had trouble staying above 1,200 and ended just below that level on Friday.
A break above the mark, however, "would be a good sign," signaling bullish momentum, said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research.
Last week, the Dow Jones industrial average rose 0.1 percent, the S&P edged up 0.04 percent and the Nasdaq dipped 0.004 percent.
Among this week's economic data is the government's second estimate of third-quarter gross domestic product growth, expected to show the economy grew a bit faster than previously thought.
Two reports on housing are expected as well: the existing home sales report, which is expected to show a drop in October sales after two months of gains, and new homes sales, which is expected to show little change.
Other reports will give a glimpse of manufacturing, consumer spending and inflation.
Investors will look to see if the data supports the Federal Reserve's decision earlier this month that it would buy more debt in an effort to boost the economy.
On Tuesday the Fed will release minutes from the policy-setting meeting in which officials discussed the decision to buy $600 billion in bonds to stimulate the economy.