One Down, Four To Go?

Everyone knows about the January effect.  Basically, how January goes is how the rest of the year goes.  If January is up, the year has been up about 74% of the time.  Or, look at it this way.  Every down January since 1950 has led to or extended a bear market, or at least a flat market.  A lot of people watch January.  I seriously don’t know though anybody that sees January down and says “I’m out for the rest of the year”, including me.  But, it’s interesting to see some of this data. 

But, maybe more interesting is the first 5 trading days of the year.  The last 36 years where the market was up the first 5 days resulted in 31 up years.  That’s 86% of the time.  So, a lot of traders are watching the first 5 days.  Those 31 up years averaged a 13.7% gain.  The markets closed up about 3% today across the board on light volume but pretty good internals.  There is growing belief (me included) that there may be some optimism regarding a regime change at the top (the President).  Whether you agree with his philosophy or policy, he will probably exude more confidence.  I’ve said that over and over.  We’ll see if it continues, but it was a nice start to the year.  Last year started out just the opposite.  So, we have one day under our belt, and 4 to go to see how what the first 5 days tell us.

This morning on my radio show, I mentioned the first few days of January you could see some reversal in the things that have been working, including bonds.  We saw treasuries sell off hard today, even after weak economic data this morning.  That money went into equities.  If you aren’t short treasuries, this isn’t a bad place to start a position.  The more the equity markets improve, the more treasuries will sell off. 

I hope you all have a great weekend.


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January 2009
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