This post is intended to be helpful for people who are frustrated about the shifts in market direction. Understand that the laws of supply & demand also apply to the buying & selling of stocks, where you have to have buyers & sellers of stocks in roughly the same stable amounts for the trajectory of the market to be stable (no matter what direction it's going in).
At the start of Summer, bankers, investment pros & brokers take off and go to the Hamptons, the Poconos or wherever they like to go to be good parents/spouses/friends for a while. Seasonal patterns and overall trends may or may not hold up this Summer, but if they do, market action should be fitful, with bouts of lethargy alternating with volatility on low volume trading. After a while, money from the new grads should start coming into the market as they start funding their 401Ks and/or putting disposable income into brokerage funds, creating a brief Summer rally together with the fact that a lot of strategic sellers will have already sold before taking off for their Summer holiday.
With that context, we are seeing that kind of market in the choppy trade yesterday & futures today. It's best to not read too much into any day to day action right now, because of the light volume. However, the market will react to key news & data, which is informative.
Wednesday’s session ushers in a new trading month, but few investors expect a reprieve from the volatility that has dominated the markets this year. Many traders remain worried about the pace of the Federal Reserve’s interest-rate increases and whether they will plunge the U.S. economy into a recession. Eight of the last 11 extended Fed rate-rise cycles have eventually ended in recession, according to Deutsche Bank analysts.
Still, many traders say a recession isn’t guaranteed, and any significant economic slowdown could be many months away. That has led some investors to wade into the market and scoop up shares with beaten-down valuations, injecting more volatility into markets.
More lightly staffed trading desks during the summer months could spur more volatility in the weeks ahead. Summer trading tends to have lower trading volumes and less liquidity, leading to more dramatic moves in stocks. Many investors are also bracing for more volatility ahead in other asset classes, which have also notched dramatic swings this year.
The S&P 500 was roughly flat for May, after a month of volatile trading
Crude prices rose, as investors digested European Union leaders’ plan to impose an oil embargo on Russia and a ban on insuring ships that carry Russian oil. Brent crude, the international benchmark for oil prices, rose 1.5% to $117.37 a barrel. West Texas Intermediate, the U.S. marker, advanced 1.7% to $116.63.
In premarket trading in New York, Salesforce jumped 7.7% after reporting revenue that outpaced analyst expectations, easing concerns about demand for its business software. Shares of energy companies also climbed, tracing oil prices higher. Marathon Oil and Occidental Petroleum each advanced more than 1% ahead of the opening bell.
Fresh data on activity at U.S. factories are due later Wednesday, as are results from Hewlett Packard Enterprise and the meme stock GameStop.
Note: Not advocating for a bull or bear market
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