Summer Trading and Low Volume | Podcast Episode #58

0:00
Hey everybody, this is Ryan Mallory with Swing Trading the Stock Market podcast, new episode here. I want to talk about the summer month trading, the low volume that you typically see during these times, particularly the last two years, because the last two years have just been, uh, freakishly low volume.

0:16
I mean, I just, I don’t even know if I’ve ever really seen this low volume before. It is super low. It is uh very lethargic. Now, granted, I say that and today the S&P is up 1413, 14 points. Yesterday, it’s hitting new all-time highs today too.

0:32
Yesterday, I think it was up like 20 points or so. So I mean, I mean, there’s there’s some decent rallies there, but you got to remember too, the S&P is now trading over 3000. So a 1, 1% rally now requires a move over 30 points. That’s, that’s pretty big. I mean, that’s from what we’re used to at least.

0:48
I mean, If you go back to 2008 when the S&P bottom, it was trading at 666, 666, the devilish, uh, bottom that we all are familiar with these days. But in any case, that’s where it bottomed at. And if you had 7 points on the S&P, That was a 1% move.

1:05
Now we’re at 3000, so a 1% move requires 3000. So 3 or 30 points, but now we’re seeing like one of the, the longer streaks without a 1% move either to the upside or to the downside. I think it’s like 32 days now that we’re going on without a 1% move.

1:21
So. It does, it does get pretty, uh, eye-opening when you look at it from that perspective. But we, we talked about, um, before, but the low volume trading, like, for instance, today, the S&P 500, it’s moving higher, but it’s on low volume. The volume buzz on the TC 2000 chart, it’s at 52%, negative 52%.

1:40
It’s not high. It’s, it’s very low. So you’re having that just like that slow stair step crawling move back to all-time highs. I think it’s good. I mean, I’m in, I got two long positions today. I got Reg’s Financial. It’s up 2.5%. I got Square.

1:56
My trade itself is up over 1%. The stock, it, it’s up about 1% for me on the trade. So I’m, I’m, I’m happy with that. I, I booked gains in the Nvidia today. Honestly, I’ve seen these semiconductor companies like Texas Instruments like Intel, they’ll report fabulous earnings.

2:15
It’ll boost all the stocks in the, in the aftermarket hours. It will boost them way up there and then when the market opens, it just starts selling off on everything. I wasn’t gonna risk it today. I went ahead and sold Nvidia for 4% gain. I’m not, I’m not playing that game. I’m just not. I’m, I’m gonna go ahead and take my, my profits and initially, it sold completely off, but the market was able to keep pushing higher.

2:38
Throughout the day, which lifted Nvidia back up, it had the support of the semis and everything else. So yeah, I, I could have stayed in Nvidia longer, but, uh, considering the, the, the month and how it’s been better to aggressively book profits rather than to just keep raising the stop losses, I decided to book profits of 4%.

2:56
I had a 3, losing trades in a row prior to that, so I did need to go ahead and get something under my belt that represented a, a nice profit for me. And Nvidia was that. Now I got Regions, I’ve got uh square working, so we got, we got a few good trades going in my favor here and then in the Trading Block to take on.

3:16
Heading into tomorrow, we got companies like Facebook reporting too, so that’ll be interesting. But back to the, the low volume trading. Let’s talk about some tricks for dealing with it. First, you gotta stay patient on low volume trading. Thing is, is that a lot of people, they say, I gotta make 2% a month or I gotta make 10% a month.

3:35
Those kind of goals are unrealistic in the market because you don’t know if you’re gonna make just 2% or make 20% or just barely scrape by because the market’s gonna give you what it wants. And you. You can’t really dictate what you feel your goals should be each month because the market’s just not always going to cooperate the way you want.

3:54
So you got to take what the market gives you. So you gotta stay patient, low volume trading, a lot of people will start loading up their portfolio. It’s easy to get, um, dipping into margin or even just be a 100% long. I’m not 100% long right now. I’ve got two positions in the portfolio. So far from that. But I’m not going to get all these positions in the portfolio, so I have a sense of like, OK, the market can move, you know, a 0.5% or 20 points like, um, we’ve seen in the last couple of days, then, then I’ll make a big, big gain off of it because just the law of numbers says if you have a lot of long positions and the market goes higher, you’re probably gonna benefit more than if you only had two positions.

4:29
But I’d rather have the quality trade setups. I’m not, I’m not gonna do that because what happens eventually in these low volume markets, there is a big sell-off that eventually comes. There’s, we saw it back in um May, and we also saw it in quarter 4 of last year with October, November and December sell-offs. The other thing too, and I, I did this with, uh, my trade in BR, which is Broad Ridge Financial Solutions.

4:50
I got into it. It looked like it was breaking out. I was up a little bit early on and then two days in a row, it just sells off really hard. It really unexplained too, because it was going against the market. It it didn’t look good at all. The chart really didn’t look good. I was down 1.3% on that particular trade.

5:06
I went ahead and sold it. It bounced back the following day. Actually today I’d be up on it right now if I still had it, um, just a couple of days later. But here’s the thing. I probably shouldn’t have sold it. I was, I was getting annoyed because the technicals weren’t there. There wasn’t really a trade setup. However, in these low volume market environments, my stop hadn’t been hit yet.

5:24
I should have let the stop boss play out a little bit longer. I sold it at 132 61. Um, my stop boss was at 130 21. So I still had another $2.40 to play, more than 1%. Uh, actually, almost 2% to play with. I should have let it play out and then use the bounce to go ahead and get out, say, OK, I already know it’s a broken trade, but because of low volume, stocks tend to, you know, go up and down, up and down up and down and not really have a lot of, uh, sense of purpose when the, when the trade just simply isn’t working in your favor.

5:55
Use that up, down, up, down to just go ahead and book, book, uh, the gains the following day, get out of the trade. Instead, I went ahead and said, I don’t like the chart anymore. If the market’s trending really strong, has a lot of volume pouring in, and it’s in seasonality wise, it’s somewhere between like November and May. OK, you probably have a reason to go ahead and cut losses, but in the summertime, if the volume’s super low and the people are just not showing up for it, it can easily bounce right back up to your entry price and you can get out a break even.

6:21
Um, that, that was probably what I should have done with the trade. That really of all my trades this month, that’s probably my sore spot, the 1.3% loss. Now I had Dropbox that didn’t work out, but technically they just, they just didn’t work out. I played the trades right. I did them, did, did what I was supposed to.

6:37
It just didn’t. Go according to my favor there. Um, stocks like NOW worked out good. I mean, I, I pulled in 7.1% on it. The other thing is people get suckered into these low volume, uh, sell-offs. They think that they got to start getting short. You want to get short on high volume sell-offs, not low volume, low volume.

6:56
There’s not a lot of conviction, there’s not a lot of panic, so there’s very little reason to get short on those kinds of, uh, market breakdowns. I don’t do it, I month of May, I. I, I really had a hard time with it because it was such a low volume sell off. Now you go back to October, November, December, those sell-offs were not hard to short.

7:14
Those were nice sell-offs. May was a little bit different because you just didn’t have a lot of conviction behind the selling. It was very low volume and eventually come June 3rd, the market bottom and just flourished ever since. So don’t get, don’t, don’t feel like that. And a lot of people do it too because sometimes the breath isn’t good in the market when it’s in the summertime, it’s, it’s turning sideways.

7:34
So then they’re, they feel compelled to have to do something so they’re like, well, fine, screw it. I’ll go ahead and short the market and then they get caught in a squeeze. A lot of people did that last couple of days. They thought the market was going to sell off. And then the last two days, the S&P 500 has rallied over 30 points in 2 days, 300, maybe 34 points.

7:53
With that said about the low sell-offs, low volume sell-offs, don’t think that the market can’t rally on low volume because it does, it does it usually every time. If I’m told going into the summer that it’s gonna be super low volume, but I have no idea what the price action’s gonna look like, I’m gonna assume it’s going higher.

8:11
Just that’s typically what what low volume does. It doesn’t mean that there’s a lot of conviction to the, to the rally, but the low volume tends to push higher, not lower. Because the reason why I say there’s not a lot of conviction behind it is because then all of a sudden when you do have a big news event, you will get the volume and it will crush whatever progress had been made in the stock market the last few days or even weeks for that matter.

8:34
And I said it earlier and I’ll say again, don’t keep adding positions because you’re not making as much money as you want because your expectations aren’t being fulfilled by the market. The market doesn’t owe you anything. Don’t, don’t try to force your will or your, your beliefs on the market because it’s probably gonna make you pay dearly for that. So be patient with the market.

8:51
You don’t have to keep adding a ton of positions. You don’t have to go full 100% of these low volumes. You get a few good trades on your belt, add another position to it, you know, if the market’s going in your favor, you know, add another position, but you don’t have to pile in, you don’t have to go into the margin just because it’s low volume because that will eventually hurt you when the market does indeed sell off.

9:08
And that that goes along the lines with overtrading your portfolio. Don’t, don’t over trade. You don’t have to over trade, um. Right now in this month here, I think I’m on my 13th, 13th or 14th trade. It’s not a lot. I mean, usually sometimes by now I’m up on my 20th trade. When we’re, you know, about a week out, I’m usually, I’ve had about 20 to 22 trades in the portfolio.

9:28
I actually like it when I go through a month and don’t have a ton of trades. It’s, it’s usually means that the trades were much higher quality. Um, you go back into May, I was a little bit Ify on on some of the the trades that I was making, I wasn’t getting a lot of uh traction with the direction that I was trying to feel out on the market.

9:47
It kept going down, uh, but it was doing it on low volume, so I had a hard time believing that there was a lot of conviction behind it because I knew what we saw on June 3rd was eventually going to happen. I just didn’t know when it, it did last the selloff lasted a little bit longer than I expected it to. But I was trading a little bit more to trying to, trying to, um, play through some of the shenanigans the market was putting us through during that particular month.

10:09
Well, that’s going to do it for today. If you guys have any questions, feel free to contact me, ryan@shareplanner.com. And you know what, check out, check out www.shareplanner.com/trading-block. I’m, I mean, I, I trade in there every day. I put all my trades in there real time, my, my entries, my stop losses, my target prices. I provide just tons of charts all day long, market analysis and all that.

10:27
But the greatest part is the community of traders that are in there, man, these people, they’re not hotheads, they’re not. They’re not trying to, um, get all alpha on you and act like they’re, they’re they’re better than the rest or that there’s there’s no desire to establish yourself as a as a great trader and there there’s just people trying to collaborate and work with each other.

10:45
It’s really awesome and I would encourage you to give it a try. It’s free for 7 days. If you don’t like it, you can cancel, but I would definitely encourage you to try it. Thank you guys and have a great evening