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January Barometer

Getting close to a new year, and many folks are wondering is this going to be a good year or bad year for the stock market.

While many folks are wondering, I am waiting for the first 5 days of trading to give me an idea of the market direction this year. You see, there is some correlation between what happens in January, on the S & P, and what happens of for the stock market for the rest of the year.

It is called the January Barometer and has 2 parts. Since 1950 it has with a fair degree of correlation predicted what the stock market will do.

Part 1: The first 5 days of trading of the S & P 500, has 85 percent correlation with the direction of the market. If the SP is up the market is up. If the S & P is down the market it is down. SO watch. Any charting service service will let you look at the S & P. Try Yahoo finance or www.stockcharts.com for example.

Part 2: Whatever happens on the S & P in the first month of trading has a 90 percent correlation with what will happen for the balance of the year. So stay tuned.

How do you us this? Well a few ideas:

  • If the S&P is sideways, that is perfect for credit spread strategy, or covered calls.
  • If the S&P is up, growth strategies will be GREAT. Like the Dogs of the Dow or directional trading to the up side.
  • If the S&P is down, consider a protective PUT, to save your account, or move to CASH. Better to be even at the end of the year than lose money.

Good Luck. Or even better Happy TRADING.

www.creditspreadsystem.com

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