The market tanked over 900 points today giving new meaning to “Black Friday”.
Eek!
But I wouldn’t worry too much because it was a shortened trading day.
To clarify, the market is usually open M-F 9:30am-4pm ET. On shortened trading days, it closes at 1pm ET instead.
Shortened trading days always fall on semi-holidays, like the day after Thanksgiving, the day before Christmas Eve, the Friday before Memorial Day, etc.
On these days, many traders take the day off completely and the rest let their junior traders step in.
So there’s much less buying and selling on these days because there are fewer traders. That makes the market less efficient.
And when that happens, market moves tend to be exaggerated in whichever direction it gets nudged.
It’s like a 2 year old up way past his bedtime who goes nuclear over something that’s normally not a big deal.
Or think of it in real estate terms.
In a market like San Francisco, there’s a lot of buyers and sellers and comps. So prices will gravitate towards the average, making it an “efficient market.”
Contrast that with buying a remote cabin the middle of Montana. There’s almost no buyers or sellers or comps, so figuring out the “average” is pretty tough. That means it could swing drastically in either direction. It’s an “inefficient market.”
Shortened trading days are like buying a cabin in the outer reaches of Montana. No one knows what’s “average” that day.
Freaking out on days like today is as rational as your up-too-late 2 year old.
Your best bet is to sit tight until things go back to normal the next full trading day.
BTW this dynamic also occurs the entire month of August when traders go on vacation.
Hope you had a great Thanksgiving and are enjoying your long weekend!
P.S. The Financial Media Complex will tell you the new COVID variant was to blame for today. But that was just the “nudge”
