1)      Professionals are Risk Averse

a.       Major players in market are still licking wounds from last years losses. They have made back substantial amounts to get closer to their high water mark and now are starting to see redemptions slow down and even some positive cash flow into the funds. So last thing they want to do is press when the markets are hitting a range and risk giving back some of those profits from Q1 and Q2.

2)      Government Mish Mosh

a.       Lots of meetings, lots of talks on rebuilding, lots of unanswered questions….leads to too much uncertainty for professionals to build an investment theme based on significant catalysts.

3)      The Risk/Reward Profile Stinks

a.       Violent, but low liquidity moves are likely. When fewer players are in the mix, that means less buyers and sellers. This can cause sharp drops in prices on little or no news. For the professional this means that the risk/reward profile for his trades is not favorable and as a result, the best trade is to take a vacation and sit on the sidelines for now.

4)      The Markets are Created by People

a.       People have lives and families. Summer is typical vacation time for many or long weekend trips to summer homes. After the roller coaster ride this market has given us, many people are just exhausted and need some solid Rest and Recuperation time to charge up for the remainder of the year. When less people are trading the markets, then less volume is injected into the markets. Less volume means fewer trades/transactions.

Think Better and Trade Better,

Dr Doug