I have been trading the equity and option markets for a long time and I confess that I am a fan of old Wall Street adages. While I am not an expert technician by any stretch, there is a technical signal which also falls into an old adage category. That is the saying that as goes January so goes the year. This “January Barometer” is described that if the market is up in January it will be a positive market for the entire year. Further old timers say if the first 5 days of January are positive, then the month of January will be positive. Similarly if the month finishes down and in the red, the annual market performance will be negative. I have read some articles which claim if the double signal occurs to the upside, first five days higher and the month higher, the chances of a positive market is over 90%! (The negative double reading success ratio has been shown to be successful 73% of the time since 1950)
We finished 2013 with a phenomenal almost historic performance by the US equity markets. The Standard and Poors 500 index started the year at the low for the entire year at 1426.19 and finished 2013 at the highest close ever at 1848.36. This 422 point gain is almost a 30% gain in the benchmark index.
Last year’s market performance reminds me of another Wall St. adage… “ Don’t confuse Brains with a Bull Market!”
Whether you believe in Wall St adages and folklore or not, it may prove to be beneficial to pay particular attention to the performance in the markets early in 2014. If you don’t believe this adage, there is always the Super Bowl Market indicator* to rely on!
* Definition of ‘Super Bowl Indicator’
An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in the stock market for the coming year, and a win for a team from the old NFL (NFC division) means the stock market will be up for the year. (source: investopedia)
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