Summer Trading

Posted by Jeff Carter
on May 29th, 2012

Different markets have different kinds of trading. If you are a grain trader($ZC_F, $ZW_F, $ZS_F), you don’t miss the summer. It’s where all the action happens. If you trade, meat($HE_F, $LE_F), not so much. Summer can be pretty difficult. That’s because of commodity patterns. For example, and obvious trend in volume is Heating oil. Trade is relatively dull now, but picks up as it gets colder.

Equities ($ES_F, $SPY) have always been the same to me. Because of the old maxim “sell in May and go away”, a lot of volume drops off over the summer. As I look at my trading patterns over the past 25 years, I rarely have huge months in June and July. August can be hit or miss, depending on anticipation going into September. Of course, when there are events that surprise the market, all bets are off.

This summer I expect really slow volume. But I expect really high volatility. There is too much going on and even more uncertainty than ever. Barry Ritholz thinks we might be seeing a melt up. I think that’s a great way to put the equity trade right now. It’s counter intuitive to conventional wisdom.

One thing for sure, the volatility, the Facebook ($FB) debacle, the European issues, the Iran issues and worries about China aren’t engendering confidence in retail investors. They are investing in their mattresses and mason jars.

While we can’t control or influence world wide events, we can do something about the structure of the markets. The market structure is broken. The retail investors flight from the market is the canary in the coal mine. Until we fix that, they won’t be back.

UPDATED

Consumer confidence plunges. There are a lot of factors that go into consumer confidence. We know consumers have lost a lot of faith in government. They have become very cynical toward their legislators, with good reason. That’s why plain speaking legislators that mean what they say, like Chris Christie, Scott Walker, Paul Ryan and Mario Rubio are refreshing. People like the old double dealing Republicans and big government Democrats fall on deaf ears. Currently, equity markets are just as corrupt as the legislatures. Europe is in a tizzy and we have uncertainty in other parts of the world. The drop in the confidence number should not be surprising.

Just wait until January when the Obama tax hikes kick in.

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