Low Volume Indicates Calm Before Storm

The last three trading sessions have been the lowest-volume days of the month.

Volume has dipped for five successive days now. Today is shaping up as the lightest trading day since the 3rd of July.

It seems investors are taking one last deep breath before the September plunge.

Ben Bernanke’s scheduled announcement of the Fed’s latest economic policy decisions this Friday should help things pick up a bit before the Labor Day weekend hits. Mitt Romney’s speech at the Republican National Convention Thursday night may also convince investors on both sides of the political fence to jump back in the trading pool.

But things probably won’t pick up too much until after Labor Day.

As I wrote last week, volume is traditionally low in August. It’s been the slowest trading month in two of the last four years.

August is the biggest vacation month of the year, as families sneak in one last trip to the beach before school starts and business picks up. So there are plenty of investors on the sidelines simply because they’re taking one last break from their daily lives.

Investors typically return in droves come September. For those who are bullish, that’s not always a good thing.

September is Wall Street’s worst month. Since 1950, stocks on the S&P 500 and the Dow Jones Industrial Average have fallen more than any other month.

With both those markets already hitting four-year highs earlier this month, another September swoon may be in the offing.

For now, though, things are eerily silent. U.S. markets barely budged again today, continuing a trend that’s been going on for nearly the entire month.

Stocks haven’t moved up or down more than 0.7% since August 3.

With the volatility index (VIX) picking up steam in the last seven trading days, however, look for the market to break free from its historically narrow trading range next week.

Published by Wyatt Investment Research at