With the Fed signaling flat to higher interest rates we are looking to the jobs report for the next market moving headline. All this heading into a long weekend. It really begs the question of what is the impact of a shortened trading week? Here are the top four trends that plague holiday weeks and long following weekends, some good, some bad. Here’s the countdown:

4. Lower Trading Volume: Most short weeks occur around holiday weekends so many traders are trying to wrap things up and stay out of risky moves before the extended down time. Volume can drop up to 50% and can impact liquidity making it harder to enter or exit trades.

3. Increased Volatility: This ties directly to that less liquid environment where it becomes a “take what you can get” situation for those who are insistent on trading. Investor relations teams also exploit the lack of attention to markets during these periods to try and sneak in big, unpleasant news. When the two combine, it can get wild.

2. Shorter Trading Days: Often the days leading into these extended weekends are shorter and force a lot to happen in half the time. It might be surprising that traders are humans too and like everyone else, they are taking advantage when 5 O’clock comes early.

1. Higher Returns: While the other three are somewhat bad news, the good news is that short trading weeks often see higher returns and greater yields. It can be influenced by traders being more optimistic or it could be that short sellers are forced to protect themselves instead of holding on for long periods with the market closed. It isn’t insignificant. In the past it has seen returns achieve 10x better results during the short weeks.

Keep and eye on the market today and I would say that in this current environment the chances are likely that more days with things closed is more time for big headlines. Prepare accordingly and enjoy the holiday.

Keep learning and trade wisely,

John Boyer

Editor

Market Wealth Daily