Year-end/new-year indicators: progress report

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I posted a short piece on Christmas eve on the so-called Santa Claus Rally as an indicator for the year ahead. Treditionally, the next indicator is  the First Five Days in January. Just to recap: “Another old stock market saw tells us the first five trading days of January sets the course for January, and if the month of January is higher, there is a good chance the year will end higher, i.e. the so-called ‘January Barometer’. Every down January since 1950 has been followed by a new or continuing bear market or a flat year. ‘As January goes, so goes the year,’ said Jeffrey Hirsch (Stock Trader’s Almanac).”

Following a positive Santa Claus Rally, the First Five Days also turned in a positive performance, with the S&P 500 Index and the Dow Jones Industrial Index up by 2.7% and 1.8% respectively. This makes it two out of two positive year-end/new-year indicators so far.

According to Hirsch, the last 36 up First Five Days were followed by full-year gains 31 times for an 86.1% accuracy ratio and a 13.7% average gain in all 36 years. “However, in US Midterm Years like 2010 the First Five Days has a dubious record. The S&P 500 posted a gain for January’s First Five Days in nine of the last 15 Midterm Years. Only five followed suit.”

Next up of the year-end/new-year indicators will be the “January Barometer” and the “December Low Indicator” (see previous post for definitions). I will comment on these as we go along.

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