Today, we had the lightest full-day volume so far this year and the price action was equally uninspired. We ended up with a poor close, but it wasn't anything too severe; mostly, it was just a lack of liquidity. Breadth was close to even and the biggest moves stemmed from some weakness in oil and gold. Most other groups just sat there and did nothing.
In seven of the last eight years, the Nasdaq posted a loss on the last trading day of the year. My theory is that most of the window dressing is done by that time and that sets the stage for those who want to take gains before the end of the year. I think conditions are ripe for such a bout of selling to occur again.
Given how we extended we are on light volume, I don't think it's a bad idea at all to hedge a bit, especially if you are holding some long positions that you don't want to sell this year. The final days of trading are always tricky, because volume is so low and there are a lot of considerations at work other than the fundamental or technical value of a stock. It isn't a time to make big moves, but there can be some good trading opportunities if you are very quick and stay flexible. I'm inclined to look for some short opportunities, especially after the weak finish today, but we'll see how things look as we wind down the year......
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