The January Barometer

stock-traders-almanac-2011

With January now in the books its time to look at the always enlightening data from Yale Hirsch over at the Stock Traders Almanac.  Mr Hirsch devised the January Barometer back in 1972, which states that as the S&P500 goes in January, so goes the year.  The indicator has registered only six major errors since 1950 for a 90% accuracy ratio. What I find interesting is that of the 6 years that were predicted incorrectly, 4 were negative for January and then finished positive for the year. Translation, even though this indicator was wrong in these four years, the market was bullish for the full year. 2009 was one of those years as January closed down 8.6%  but the full year return was 23.5%.  The S&P500 was up over 2% for the month of January which bodes well for the bulls this year according to the barometer.  As you may know, 2011 is also a pre-presidential election year. Full years followed January's direction in 14 of the last 15 pre-presidential election years. The sole error was in 2003, as a new bull market was beginning.  Time will tell if 2011 follows the historical predictions of the January Barometer or the pre-presidential election year trends, but as always, we'll take all the good news we can get.