What In The World Happened To The Stock Market Today?
|July 4th Weekend|
Why did traders sell today? You have some seasonality hitting markets. Historically this period ahead of July 4th weekend has proven to be a low point. Portfolio managers may be doing the normal lightening up into the weekend.
Here's The Last Three Days Trading Action
|Source: Interactive Brokers: Weak trading today.|
July 4th Seasonality Affects Markets
|Buy 2 days before,|
sell year end
|Buy one day before,|
sell at year end
Here's a chart from stockcharts.com.
What you see above is that traders never have a better time in the year to buy than right before July 4th weekend. If they bought the one and two days before July 4th weekend they'd be up an average 13% and 37% respectively.
The reason for that is markets are typically down into July 4th weekend.
This year's July 4th is on Tuesday which gives fund managers and extra reason to "clean their sheets" into the now four day weekend. Nimble traders can benefit from that opportunity.
Portfolio Managers Also Locking In A Great Q2
Keep in mind this is also quarter's end so nerves run high among portfolio managers. Many of them were happy to have gains in Q2. Any weakness may have spooked them into locking in those gains.
|Source: Interactive Brokers: S&P 500 ETF SPY Last 3 Months|
Two, the uptrend wasn't broken in today's move.
If today's action continues after July 4th we may have an issue. We don't expect that. We're in a bull market.
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