Markets Recognize Labor Day

08/17/2007 12:00 am EST

Focus: STRATEGIES

Tom Busby

Founder and CEO, DTI

The “dog days” of summer are about to end.  Soon families across America will head for the beach, the lake, or some other relaxing spot to enjoy a long Labor Day weekend.  With that traditional holiday, comes the official end to the summer season.  At its close, the children go back to school and the vacation season that began on Memorial Day is officially over for another year.  Just as families anticipate the holiday, so do the financial markets.

Historically, during the summer months a sense of malaise hovers over Wall Street.  As the temperature moves us, trading volume moves down.  Fewer traders report to work or sit at their home-based offices clicking the “buy” or “sell” button.  The Hamptons and Cape Cod may be busier than usual, but a general air of lethargy permeates the markets.

Unlike many summer trading seasons, this one has been somewhat exceptional.  Concern for sub-prime creditors has made investors jittery and given day traders a run for their money – literally – as they chased volatile markets swinging up and down.  September may not see the end of that crisis, but added volume should help day traders better ascertain short-term trends.  At any rate, Labor Day is a date to watch.  The financial markets take note of it and generally respond.  Write this down: After a major holiday the current trend may be accelerated, or traders may use the date to reverse the trend and move prices in the opposite direction. 

Labor Day is not the only important date to watch.  There are a number of other holidays that tend to affect the global markets.  Believe it or not, April 15th is also such a date.  Apparently, paying the taxman puts some traders in a pensive mood and their collective actions affect the markets.  An ongoing trend is often reaffirmed or there is a reversal.  Like Labor Day, April 15th tends to be a watershed day the markets respect.

This summer, July 4th proved to be a brief point of affirmation before prices fell.  On July 5th, the S&P 500 opened at 1536.00.  An upward trend appeared to be confirmed as prices moved up for the next week or so reaching 7-year highs.  The S&P 500 futures soared to 1566.25 on July 16th.   Then there was a period of adjustment and by August 6th, the S&P had moved back down to its yearly opening price of 1433.00.  The market erased a whole year of gains in only three weeks. 

In addition to Labor Day, July 4th, and Tax Day, other similar dates include Memorial Day, Thanksgiving, and Christmas.  Historically, the Thanksgiving and Christmas Seasons are great for trading, at least for my strategies.  The good cheer of the holiday season tends to spread and permeate the floors of the exchanges.

When trading, remember that holidays – including Labor Day – are significant dates for the financial markets.  Take note of important opening prices as the Globex (night trading) session begins on September 2nd.  Observe how prices move throughout the session and where they stand at the end of it.  Has a current trend been reaffirmed?  Or, have the markets decided to reverse themselves and move in an opposite direction?  Then use that information to add another level of analysis to your trading.

Personally, I enjoy trading futures contracts.  Therefore, I have checked the CME calendar for trading times on Labor Day.  On Sunday, September 2, 2007, the electronic system opens at 5:00 PM CT, as usual.  Trading continues throughout the evening, night, and early morning hours.  However, on Monday, September 3rd, the CME closes at 10:30 AM CT.  Trading will be closed until 5:00 PM CT when the Globex will fire up again and trading will begin. 

Check with your favorite exchange and determine its hours for this holiday session.  You may not want to trade, but it is a good idea to know how the markets responded to the holiday.  That knowledge may be helpful to you in the days ahead.

Important Holidays for the Markets

New Years Day
April 15th
Memorial Day
July 4th
Labor Day
Thanksgiving
Christmas

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