What In The World Happened To The Stock Market Today?

July 4th Weekend Traders Take A Break
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


S&P 500 ETF SPY Last 3 Days Ahead Of July 4th
Source: Interactive Brokers: Weak trading today.
We had weak action today. There has been a ton of volatility the last few days but we're staying bullish. We think a few factors hit markets seasonally short term.



July 4th Seasonality Affects Markets

HolidayBuy 2 days before,
sell year end
Buy one day before,
sell at year end
President's Day*   -0.1%12.2%
Good Friday  7.3%17.8%
Memorial Day-4.7%22.8%
July 4th13.3%37.3%
Labor Day16.8%33.7%
Election Day   17.9%4.6%
Thanksgiving   4.3%1.1%
Christmas-7.1%15.2%
New Year's31.1%19.6%

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.

S&P 500 ETF SPY 3 Months
Source: Interactive Brokers: S&P 500 ETF SPY Last 3 Months
The chart above tells you two things. One, traders had a good quarter and may want to lock in profits.

Two, the uptrend wasn't broken in today's move.

Conclusion

If today's action continues after July 4th we may have an issue. We don't expect that. We're in a bull market.

Disclaimer: Securities reported by Elazar Advisors, LLC are guided by our daily, weekly and monthly methodologies. We have a daily overlay which changes more frequently which is reported to our premium members and could differ from the above report. Portions of this report may have been issued in advance to subscribers or clients. All investments have many risks and can lose principal in the short and long term. This article is for information purposes only. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC and their related parties harmless. Any trading strategy can lose money and any investor should understand the risks. #in, $spy, ^GSPC, INDEXSP:.INX, CME Globex: ES