The month of January supplies us with two interesting indicators;
the “first five days” early warning system and the full-month
barometer.
Employing the S&P 500, since 1950 the market has risen over
the first five days of the year 35 times. 30 of these the market
has then proceeded to post full-year gains, including 2004. [The
record is more mixed, 10 up / 10 down, in the 20 years where the
market declined the first five days.]
A sampling…
S&P 500…Total return…1st 5 days / Jan.
1995……… +37.4%……….. +0.3%
1996……… +23.1…………. +0.4
1997……… +33.4…………. +1.0
1998……… +28.6…………. -1.5
1999……… +21.0…………. +3.7
2000……….. -9.1………….. -1.9
2001………. -11.9…………. -1.8
2002………. -22.1…………. +1.1
2003……… +28.7…………. +3.4
2004……… +10.9…………. +1.8*
*S&P return for 2004 is thru 12/31, including dividends.
Overall for the full month of January, and again using the S&P
500, “as January goes so goes the year.” Discovered by Yale
Hirsch, founder of the Stock Trader’s Almanac, there have been
only five “major” errors since 1950 using this indicator and in
each of those instances there is a ready explanation; 1966 and
1968 were influenced by Vietnam, 1982 saw the start of a major
bull market in August, 2001 was impacted by 9/11, and 2003’s
January performance was held down by the pending war in Iraq.
Source: “Stock Trader’s Almanac / 2005.” *Note: I have listed
the total return figures for the S&P 500 above, including
dividends. “Stock Trader’s Almanac” only uses the gross figure
for the index without including dividends.
Next week we wrap up 2004.
Have a healthy and prosperous new year.
Brian Trumbore
