Stocks and the January Barometer

Market analysts, prognosticators and soothsayers have been looking at the month of January in an attempt to get a pulse for how the rest of the year will turn out. However, stock investors should take this January’s performance with a grain of salt.

So goes January, so goes the year, according to the so-called January Barometer.

Over the past 11 times the S&P 500 increased more than 5% over the first month of the year, the overall market returned 24.3% on average, with gains ranging from 45% in 1954 to 2.03% in 1987.

Looking at the January 5-Day Rule – an indication of the bullish or bearish nature for the rest of the year, 2013 could be shaping up for a bullish bias, with some calling for the S&P 500 to end the year at 1,655. The first five day’s performance has successfully called the S&P 500′s direction 33 out of 39 years where the condition was met.

J.C. Parets at All Star Charts has an in-depth look at the January Barometer. “When the month of January records a gain, as measured by the S&P500 Index, history suggests that the rest of the year will serve as a benefactor, and finish in the black as well. Since 1950, this indicator has an incredible 88.7% accuracy ratio,” he writes. “Unfortunately, history doesn’t speak too favorably for February in terms of seasonality, especially in post-election years.”

Source:  Tom Lydon, ETF Trends

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

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