Investment Strategies: Profit from the dog days of summer

Posted June 2, 2008

“Last summer, the volume on the New York Stock Exchange was higher in June, July, and August than it was in the three months prior or the three months after.” — Rick Pendergraft

by Rick Pendergraft

Baltimore – (TFN): Beware, we have now entered the dog days of summer. Historically, stock market volume slows from Memorial Day until Labor Day. The slow summer months are believed to come about because traders go on vacation and the traditional stereotype is that most of Wall Street is playing on the beaches in the Hamptons.

Is this stereotype a thing of the past? I think it is.

Last summer, the volume on the New York Stock Exchange was higher in June, July, and August than it was in the three months prior or the three months after. The credit crisis was just coming to light and this spurred some of the additional activity, but not all of it.

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With a huge percentage of trades being entered electronically these days, the brokers and floor traders are not needed as much as they were in the past.

The old adage on Wall Street that says you should “sell in May and go away” was based on the summer months being boring, but I don’t think you can do this anymore. Over the last few summers, there was plenty of movement and money to be made. Most of it was on the down side of the market, so if you don’t like playing the short side of the market it made it tough, but there is just as much opportunity to the downside as there is the upside.

Investment Strategies: Change your strategy with your wardrobe

Just like you change your wardrobe for the summer months, you might want to change your investment tools for the summer months as well. Don’t just pack away your trading like you do your winter clothes. Learn to play moves to the downside and use some different tools to make money. Read on to learn exactly how to play the summer markets.

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