Historically, stock market volume has slowed down from Memorial Day until Labor Day. (Picture Wall Street traders lounging on the beach in the Hamptons, and you’ll know why.) Hence the old Wall Street adage: “Sell in May and go away.” But this stereotype may be a thing of the past.
Last summer, volume on the New York Stock Exchange was higher in June, July, and August than it was in the three months prior or the three months after. The credit crisis was just coming to light, spurring some of that additional activity, but not all of it. Over the last few summers, there was plenty of movement and money to be made. There’s no reason to believe this summer will be any different.
But before you jump into summer trading with both feet, be aware. Most of the summer movement has been on the downside of the market. Fortunately, there is just as much opportunity to profit from the downside as there is with the upside. One easy way to make money on a downside move would be to buy an inverse index ETF. You can buy one on the Dow (DXD), the S&P (SDS), or the Nasdaq (QID).
So don’t just pack away your trading like you do your winter clothes. Learn to invest in the downside by using some different tools to make money.