2014 January Barometer

January Effect. The stock market has shown an uncanny tendency to end the year higher if prices increase during the month of January, and to end the year with lower prices if prices decline during January. The saying is, "So goes January, so goes the rest of the year." Between 1950 and 1993, the January Effect was correct 38 out of 44 times--an accuracy of 86%.   (An excerpt from marketinout.com)

The following is a detailed chart of January 2014 with the 2014 calendar superimposed below the chart.

The month of January 2014 obviously closed down and that would suggest that 2014 might be a down year, OR, it may suggest a correction at sometime during the year.
The reason this chart was shown in great detail is because, sometimes, the January price pattern may suggest the general price pattern for the year.   Note that this is only a suggestion as nothing is ever written in stone.

Additional information on this topic can be found at the Stock Traders Almanac, as follows.

Friday, January 31, 2014

January Barometer 88.9% Accurate (STA14 Page 16), Almanac Investor Subscribers Emailed Official Results

Dow: 61.9% S&P: 66.7% NAS: 61.9% R1K: 61.9% R2K: 76.2%

"Sell in May and go away. However, no one ever said it was the beginning of the month."
—John L. Person (Professional trader, author, speaker, Commodity Trader's Almanac, nationalfutures.com, 6/19/2009, b. 1961)

$SPX January Barometer Results Are In
By Jeffery A. Hirsch & Christopher Mistal

Devised by Yale Hirsch in 1972 our January Barometer (JB) states that as the S&P 500 goes in January, so goes the year. The indicator has registered only seven major errors since 1950 (all within secular bear markets) for an 89.1% accuracy ratio. Vietnam affected 1966 and 1968; 1982 turned out to be the start of the next secular bull market; two January rate cuts and 9/11 affected 2001; the anticipation of military action in Iraq held down the market in January 2003; 2009 was the beginning of a new bull market following the second worst bear market on record; and the Fed’s second round of quantitative easing likely saved 2010.



Well today’s close makes it official. Ye Olde JB is negative (page 16 STA14). On top of this, DJIA closed below its December closing low of 15,739.43 on January 29 (page 40 STA14). Both are ominous for this nearly 5-year-old bull market. Since 1950, this combination has occurred 21 times with declines going on to average –14.0%. Full-year performance was negative 14 times with all 21 years posting an average loss of –3.2%.

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This has been posted for Educational Purposes Only.   Do your own work and consult with Professionals before making any investment decisions. 

Past performance is not indicative of future results.