Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
VR and Gaming Becomes the Metaverse - 7th Dec 21
How to Read Your Smart Meter - Economy 7, Day and Night Rate Readings SMETS2 EDF - 7th Dec 21
For Profit or for Loss: 4 Tips for Selling ASX Shares - 7th Dec 21
INTEL Bargain Teck Stocks Trading at 15.5% Discount Sale - 7th Dec 21
US Bonds Yield Curve is not currently an inflationist’s friend - 7th Dec 21
Omicron COVID Variant-Possible Strong Stock Market INDU & TRAN Rally - 7th Dec 21
The New Tech That Could Take Tesla To $2 Trillion - 7th Dec 21
S&P 500 – Is a 5% Correction Enough? - 6th Dec 21
Global Stock Markets It’s Do-Or-Die Time - 6th Dec 21
Hawks Triumph, Doves Lose, Gold Bulls Cry! - 6th Dec 21
How Stock Investors Can Cash in on President Biden’s new Climate Plan - 6th Dec 21
The Lithium Tech That Could Send The EV Boom Into Overdrive - 6th Dec 21
How Stagflation Effects Stocks - 5th Dec 21
Bitcoin FLASH CRASH! Cryptos Blood Bath as Exchanges Run Stops, An Early Christmas Present for Some? - 5th Dec 21
TESCO Pre Omicron Panic Christmas Decorations Festive Shop 2021 - 5th Dec 21
Dow Stock Market Trend Forecast Into Mid 2022 - 4th Dec 21
INVESTING LESSON - Give your Portfolio Some Breathing Space - 4th Dec 21
Don’t Get Yourself Into a Bull Trap With Gold - 4th Dec 21
GOLD HAS LOTS OF POTENTIAL DOWNSIDE - 4th Dec 21
4 Tips To Help You Take Better Care Of Your Personal Finances- 4th Dec 21
What Is A Golden Cross Pattern In Trading? - 4th Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - Part 2 - 3rd Dec 21
Stock Market Major Turning Point Taking Place - 3rd Dec 21
The Masters of the Universe and Gold - 3rd Dec 21
This simple Stock Market mindset shift could help you make millions - 3rd Dec 21
Will the Glasgow Summit (COP26) Affect Energy Prices? - 3rd Dec 21
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Forecast for 2013, The January Effect

Stock-Markets / Stock Markets 2013 Jan 18, 2013 - 07:38 AM GMT

By: Investment_U

Stock-Markets

Matthew Carr writes: Can we know where the market is headed before the year even gets underway?

That’s always the question, isn’t it?

At the start of the year, there’re all kinds of predictions about where the market is going to head. All the big, bold predictions come out. And we’ll see articles that discuss indicators like “Where January goes, the market follows…”


But that’s hogwash.

If we look at the S&P 500′s returns going back to 2000, this trend “Where January goes, the market follows…” buckles.

For example, since 2000, January has yielded negative returns for the S&P seven out of 13 years… January is the start of earnings season, and it’s typically volatile because of that.

But during that same span, the S&P itself has had negative full-year returns only four times… Three of those when the month of January ended in the red.

To summarize, looking at the entire month of January is a misdirected indicator for how the market will do the rest of the year.

Finding a More Dependable Indicator
But there’s another January trend indicator that’s a lot more successful. And it looks at a much smaller period of time… just five trading days.

The “first five days of January” indicator was the brainchild of Yale Hirsch back in the early 1970s. It was hailed as an early warning system.

The idea is fairly straightforward: Those first five days give you a barometer of investor sentiment. And this can show you where the market is likely heading over the next year.

Admittedly, I’ve been intrigued by this indicator…

But instead of just blindly following “If the first five days of January are positive, then the rest of the year will be positive, too…” I’ve found you get a clearer picture if you only look at two thresholds. The rest are sort of neutral – akin to a shoulder shrug.

If we just look at a small sample going back to 2000, we can see it’s fairly accurate.

When the first five trading days in January on the S&P 500 yielded a gain of 1.73% or higher, the S&P returned double-digit gains for the year four out of five times. The fifth was a return of 8.99%.

Year First Five Days of January Return Full-Year Return
2012 1.73% 13.29%
2010 2.55% 12.64%
2006 3.35% 13.62%
2004 1.80% 8.99%
2003 3.42% 26.38%

In the last 13 years, the S&P has returned double-digit full-year gains five times. And this indicator predicted it right in four.

Now, on the other hand, if those first five days return a loss of -1.8% or larger, the S&P ended the year with a double-digit loss three out of four times.

Year First Five Days of January Return Full-Year Return
2008 -5.30% -38.47%
2005 -2.12% 3.00%
2001 -1.85% -13.04%
2000 -1.89% -10.14%

The S&P has returned full-year double-digit losses four times in the last 13 years. And this indicator predicted it right three of those times.

So, this year, the S&P returned a gain of 2.17% during the first five trading days. Going all the way back to 1950, if the first five trading days of January returned a gain of 2% or more, the market ended the year positive. Better yet, only twice did it not result in double-digit returns…

One more reason to be bullish on stocks in 2013.

Good Investing,

Matthew

Source : http://www.investmentu.com/2013/January/stock-market-forecast-for-2013.html

by , Investment U Research

http://www.investmentu.com

Copyright © 1999 - 2013 by The Oxford Club, L.L.C All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in