I am not trading during the holidays. One reason is that volume, even for liquid markets like the E-Mini often goes flat. Such markets, as far as I am concerned, add an increased element of risk. Since trading has enough risk for my blood in normal markets, I just avoid markets when the liquidity drops a lot. How much is a lot?

Figure 1 E-Mini Daily Volume (histogram) December 26, 2012

Since a picture is worth a thousand words, look at the chart shown in Figure 1. Look closely, as the volume for today, 12-26-2012 is easily missed. Hint: It is the weensy green line at the far bottom right on the chart. And you really have to look closely to see 12-24-2012’s volume – but it too is green.

So we have a market that hardly anyone one (relatively speaking) is trading – and it is going up.

Do I sense a shorting opportunity here? Yes, but not until after the holidays are over and the volume starts to normalize.

 

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