Trading Activity Begins to Slowly Decline after Memorial Day
In recent years, Memorial Day weekend has become the unofficial start of summer. Not long afterwards trading activity typically begins to slowly decline (barring any external event triggers) towards a later summer low.
We refer to this summertime slowdown in trading as the doldrums due to the anemic volume and uninspired trading on Wall Street. The individual trader, if they are looking to sell a stock, is generally met with disinterest from The Street. It becomes difficult to sell a stock at a good price. That is also why many summer rallies tend to be short lived and are quickly followed by a pullback or correction.
Above are plotted the one-year seasonal volume patterns since 1965 for the NYSE and since 1978 for NASDAQ against the annual average daily volume moving average for 2021 as of the close on June 4, 2021. The typical summer lull is highlighted in yellow. It appears that the typical summer volume decline has arrived early this year with volume dipping below average already. A prolonged surge in volume during the typically quiet summer months, especially when accompanied by gains, can be an encouraging sign that the bull market will continue. However, should traders lose their conviction and participate in the annual summer exodus from The Street, a market pullback or correction could quickly unfold.
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