January Barometer is a pattern watched since 1950. It gives us “hint” as to market direction early in the year.
Always interested to see what happens in the first week of trading in January (and the first month too). There is a pattern, that has a high correlation called the January Barometer. It is a 2 part pattern.
First. As the first 5 trading days going in the stock market (S&P) so goes the balance of the year. Note that is the first 5 trading days, not the actual calendar days. There is about about 85% correlation based on pasted performance since 1950.
So, if the market goes up in the first 5 trading days of January, then the market is likely to go up. It can give you an idea, of what kind of year, it may be in the market. If the market (S&P 500) goes side ways, the year will be sideways. Down the same. Therefore, we have an idea, of direction right out of the gate and may plan accordingly.
Now remember this is a hint, not an absolute. Last year (2018), the January barometer said the market was going up. It did. GREAT. The the market crashed at year end (badly). So, it is not an absolute.
Second part of the January barometer is, it is said, as the first month of trading goes in Jan. So goes the market. The full trading month of January. A little higher correlations almost 90 percent based on past performance. So,
So. Watch the first 5 days, then the full month of trading. See what direction, the market may go. May give us a hint (not absolute). Happy trading.
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Jan 8th. The Spx opened at 3764 on Jan 4th, today the 8th looks like it will close at over 3800. Therefore the first 5 days, suggest the market will be up this year. With about a 85% correlation. Happy trading.