Summer Doldrums Have Arrived - Market Volume Likely to Continue Fading

In a typical year, barring any external event triggers, trading activity typically begins to decline around the July 4th holiday towards a summer low usually in late August. We refer to this summertime slowdown in trading as the doldrums due to the anemic volume and uninspired trading on Wall Street. Fading summer volume is also why many summer rallies tend to be short lived and can be quickly followed by a pullback or correction.

Above are plotted the one-year seasonal volume patterns for the NYSE since 1965 and since 1978 for NASDAQ against the annual average daily volume moving average for 2024 as of the close on July 5, 2024. The typical summer lull is highlighted in yellow. After spiking around quarterly options expiration and the end of the first half of the year, trading volume has been retreating in typical seasonal fashion. A prolonged surge in volume during the typically quiet summer months, especially when accompanied by market gains, can be an encouraging sign that the bull market will continue. However, should traders lose their conviction and participate in the annual summer exodus from The Street, a market pullback or correction could quickly unfold.