With the arrival of Memorial Day we enter the typical summer trading season. While this period is often marked by lower overall trading volume and less activity, we have encountered periods of high volatility during the summer months. June actually ends the NASDAQ’s best 8 month performance window and is the last month of the second quarter and the period during which we see many analysts begin to adjust annual EPS estimates.
While the day after Memorial Day has been up 8 of the past 11 years the bigger opportunity this week may revolve around Wednesday June 1. The first trading day in June has been up 10 of the past 13 years and as we have written previously the strong track record of first trading day performance in recent years is amazing.
During the past 13 years, the Dow Jones Industrial Average (DJIA) has gained more points on the first trading days of all months than ALL other days combined. This statistic is amazing to us as market observers but must be on the radar of serious traders. From September 1997 through May 2010 the DJIA gained 3,529.41 total points. The gain only on first trading days of each month was a remarkable 5,173.23 on these 153 days. The other 3,034 days combined for a loss of 1,643.80. The research is documented in the 2011 Stock Traders Almanac on page 62. June 1 2010 was a down year also and the losers have been triple digit in DJIA points. The positive seasonal bias remains however and is worth noting. So far in 2011 only March and May have been down on the first trading day so 3 of the 5 months have been winners.
The equity markets have put in several straight winning days so may be in for a bit of a pause. The pre-holiday volume on Friday was so light it is hard to interpret much from the trading. We have no new trades at this time.