August 23, 2016 By Louis Navellier

All content in this Introduction to Marketmail represents the opinion of Louis Navellier of Navellier & Associates, Inc.

August Doldrums Often Precede September Fireworks

Like the weather, many small cap, special-situation stocks have been heating up in recent days. This is a good sign, since if some relatively obscure stocks can firm up on light volume during vacation time, we could see more buying across the board when trading volume historically rises again, after Labor Day. Coincidentally, Bespoke Investment Group's "Chart of the Day" last Friday (August 19: "Volume, Like Paint, Drying Up") showed how a string of low-volume days is usually followed by better performance in subsequent months. Bespoke opened by saying, "The last time that we had an above average volume day in the S&P 500 tracking ETF (SPY) was on July 15th. That's 25 straight days of below average volume." Bespoke then examined the seven other times since 1996 when "SPY" traded at below-average volume for 25 days or more. In the subsequent six months (following the 25th subpar volume day), SPY was up an average 5.25% (median: 7.11%). In fact, the longest low-volume trading-day streak happened earlier this year, with a 53-day streak starting February 12, the day after the 2016 market low. (The S&P is now up 19% since February 11.) The theory is essentially that if the stock market can meander higher on lighter trading volume, then it is potentially much more explosive on the upside, when trading volume perks up.