Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
UK Corona Catastrophe Trend Analysis - 2nd Jun 20
US Real Estate Stats Show Big Wave Of Refinancing Is Coming - 2nd Jun 20
Let’s Make Sure This Crisis Doesn’t Go to Waste - 2nd Jun 20
Silver and Gold: Balancing More Than 100 Years Of Debt Abuse - 2nd Jun 20
The importance of effective website design in a business marketing strategy - 2nd Jun 20
AI Mega-trend Tech Stocks Buying Levels Q2 2020 - 1st Jun 20
M2 Velocity Collapses – Could A Bottom In Capital Velocity Be Setting Up? - 1st Jun 20
The Inflation–Deflation Conundrum - 1st Jun 20
AMD 3900XT, 3800XT, 3600XT Refresh Means Zen 3 4000 AMD CPU's Delayed for 5nm Until 2021? - 1st Jun 20
Why Multi-Asset Brokers Like TRADE.com are the Future of Trading - 1st Jun 20
Will Fed‘s Cap On Interest Rates Trigger Gold’s Rally? - 30th May
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20
The AI Mega-trend Stocks Investing - When to Sell? - 28th May 20
Trump vs. Biden: What’s at Stake for Precious Metals Investors? - 28th May 20
Stocks: What to Make of the Day-Trading Frenzy - 28th May 20
Why You’ll Never Get Another Stimulus Check - 28th May 20
Implications for Gold – 2007-9 Great Recession vs. 2020 Coronavirus Crisis - 28th May 20
Ray Dalio Suggests USA Is Entering A Period Of Economic Decline And New World Order - 28th May 20
Europe’s Coronavirus Pandemic Dilemma - 28th May 20
I Can't Pay My Payday Loans What Will Happen - 28th May 20
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

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

6 Critical Money Making Rules