Thursday, January 10, 2013

Another January Indicator

We described the other day the effects of the January Indicator, which holds that the direction of the market in January indicates its direction over the course of the year. If you're too impatient to wait for the end of the month, an economist at Goldman Sachs says he has been using an indicator based on just first the five days of January - and it might be an even stronger indicator than the entire month's returns.

For 85 percent of the years since 1950, the first five trading days of January have forecast the overall direction of the Standard & Poor's 500 for the entire year. The only years in that time frame in which the two have failed to track have been 1966, 1973, 1990, 2002 and 2011, although 2011 should come with an asterisk, since the S&P was famously flat for that year.

And the first five days of this year? For the first five trading days of 2013, the S&P 500 was up by about 2 percent. So if you believe in omens, we should be in for a positive year.

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