The thing about the big holiday weeks (Thanksgiving and Christmas) is that even though we can discount most of what’s happening in terms of volatility, we can’t ever be sure that “what’s happening” won’t end up being in line with the market’s next move when activity picks back up again. That might be a bit confusing, so I’ll try a few more ways to explain.
Volume is a good thing to know about, according to most market mavens. The thought is that volume legitimizes movements, and to a certain extent, that’s true. The problem is that an absence of volume doesn’t mean a particular movement is illegitimate or destined to reverse! If you like, you can think of low volume trading days like the those tense few moments on Wheel of Fortune where the wheel is passing over a really good or really bad space. It’s perfectly reasonable for anticipation to build if it looks like the wheel might soon be delivering exceptionally good or bad news, but at the end of the day, we don’t really know if it’ll land on the space responsible for all that participation or the much more boring one right beyond it.
With that in mind, the metaphorical wheel is still spinning. Anticipation surely ramped up yesterday as the wheel passed through a very bad space (“lose the rest of your turns, an arm, a leg, your dignity, and holiday cheer–hey… the stakes are higher in this version!), but again, the wheel is still spinning. It won’t really come to a rest until the first part of January. So between now and then, we may well make it past this scary space, or things could continue to look super dire. As of now, it’s just one day with the lowest volume of the year that hasn’t even violated long or short term rally trends. If things get any worse from here, it won’t be because of Tuesday. Here are some charts for perspective.
By way of housekeeping, keep in mind that today is an early close (2pm Eastern) and that, unofficially, markets will be shut down long before that. The only significant data is Jobless Claims at 830am and a 7yr Treasury auction at 1pm. “Significant,” of course, is a matter of debate, considering my contention that it wasn’t really data that moved bond markets in the first place yesterday.