Here is my observation FWIW on markets and holidays:
In all the years I have been following the market, which includes time that I was casually following the market when I was not participating, I have for the most part found profit taking to occur right before the holiday itself. Many times if the holiday had a positive effect on the stock market, it was *after* the holiday when everyone came back from their holiday. There are cases where the stock market moved up *during* the holiday week, but then sold off before the weekend. This is because IMO traders do not change their character just because it is a holiday in relationship to risk. The traders that take their money off the table will continue to do so for the weekend. Actually, an extended weekend encourages more people to participate in this custom. This is even more likely to be true if there are profits to take off the table. This is how it has been for as long as I can remember (over 20 years), and probably will continue to be this way.
As far as "the book" is concerned, I suggest to read it carefully to differentiate with respect to the days it talks about before the holiday weekend, the day just before the weekend starts, and the days following the holiday weekend. This careful examination of the text can make all the difference in the world to the market participant. I think much of what is in print should be taken with some reservation until the trader's experience supports or invalidates what they have read. Because IMO much that is available is ambiguous leaving room for misinterpretation, or just plain inaccurate with someone pushing their pet theories, like the "random walk" theory and the book by Burton Malkiel called "A Random Walk Down Wall Street". In a later version of the book, right toward the end of the text, he essentially states that "Gee, upon further analysis, I may have been wrong" which leads him to reluctantly consider a compramise. I will say the quality of books that has been coming out on the market in recent times has improved in a noticeable way.
Comments welcome and encouraged.
Bob Graham |
