2009’s Final Week Approaches – Looking Good, So Far

Wednesday, December 23, 2009

1124434_timesLast Friday, in “Happy Holidays! – Now, Get To Work Preparing for Investment Opportunities!” I mentioned that the final weeks of December typically see a slowdown in trading volume – especially the last week of the year between Christmas and New Year’s. I also mentioned how it can be hard for a trend to bend during this time because so many investment professionals and others are on holiday.

I thought it would help to show the data…

First, using the Dow Jones Industrial Average (DJIA), here is what happened to trading volume. The graph shows December’s final week average daily trading as a percent of “normal” – defined as December’s pre-Christmas Eve average daily trading volume. The final week’s volume typically runs about 60% to 65%, with 1998 and 2000 as exceptions. Note that the reduction occurred even in 1999 (internet bubble), 2001 (9/11) and last year (problems!).

Dec volume DJIA

Second, here is what happened to the DJIA performance for December. Shown is a line for each year – running from December 1 to 24, then continuing to December 31. Most of the final week performance periods are continuations or slight deviations. Note that there are two standout years: 2007 and 2008. Because they were both part of the problem period, they should be considered exceptions.

Dec performance DJIA

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This week is setting the stage nicely for next week’s slowdown and, hopefully, opportunistic buying. So far, the news is good for owning stocks and avoiding bonds.

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December 2009