JANUARY – A LOOK AHEAD AT SEASONAL TRENDS
29 December 2011 by Cullen Roche
6 Comments
With January right around the corner it’s time to take a look at some seasonal trends. January tends to be a pretty good month as it’s the tail end of the best three month span of the year. The statistics come courtesy of The Stock Traders Almanac:
- January Barometer predicts year’s course with .783 batting average.
- 14 of last 15 pre-presidential election years followed January’s direction.
- Every down January on the S&P since 1950, without exception, preceded a new or extended bear market, a flat market, or a 10% correction.
- S&P gains January’s first five days preceded full-year gains 86.5% of the time, 12 of last 15 pre-presidential years followed first five day’s direction.
- November, December, and January constitute the year’s best three-month span, a 4.2% S&P gain.
- January NASDAQ powerful 2.8% since 1971.
- “January Effect” now starts in mid-December and favors small-cap stocks.
- 2009 has the dubious honor of the worst S&P 500 January on record.
Source: Stock Traders Almanac
Cullen,
Per Kass’ earlier piece, I wonder if anyone has really looked at the effect the etfs, particularly the levered etfs, have on market movements. I do see this as a bubble or something strange brewing. Is no one else concerned about these instruments. They have just come on the scene and have exploded in popularity.
Perhaps the volume is not enough to make a difference, but I find it quite disconcerting as to the potential problems that could rise to the surface using these instruments. Any studies or analyses on the subject would be very interesting to review.
Thanks!
Counterparty risk could become a big issue in ETF’s that are synthetic. As a hypothetical if you were invested in an ETF that was synthetic and had MF Global as a counterparty to some hedge which was in the money then even though your investment strategy was good, the ETF would lose value because of the failure of the counterparty for the in the money hedge.
Explorer, that is exactly right and a big concern of mine. What they don’t tell you is that the so called shares the etfs hold are actually allowed to be lent out for shorting purposes and if the counterparty fails that could be a big big problem. No SIPC insurance for that potentiality.
Why doesn’t the Fed intervene in markets exploiting these trends? If you’re going to buy junk RMBS or arbitrarily twist Tsys, why not just buy the SP500 in January to goose the markets? You’d think they have enough ex-GS people to know something about market manipulation.
Just a general observation… I don’t know of anyone predicting January to stink for equities.
I’ll be the first then. January will stink for equities, that’s my prediction.