January Barometer Flashes a ‘Buy’. Now What?

  • SumoMe

Three cheers – for the first time since 2013, the January Barometer is bullish. The January Barometer was devised by Yale Hirsch of The Stock Trader’s Almanac in the early 1970’s and is still tracked today at STA by his son Jeffrey Hirsch.  The simple theory is that “as January goes, so goes the rest of the year”, if January shows a gain then the 11 months from end of January through the end of December should also show a gain.

(See also A Two-Fund Portfolio for the Next Three Months)

For the record, since 1943 following a gain for the Dow Industrials during January, February through December shows:

  • # times up = 39 (83% of the time)
  • #times down = 8 (17% of the time)
  • Average Gain = +13.9%
  • Average Loss = (-12.3%)

 

Other Useful January Studies

The January Barometer – Myth or Statistically Relevant? By Eric Hein

What A Strong January Means For Stocks Historically by Dana Lyons

How to Use AND How NOT To Use This Information

The proper way to use this information is as “weight of the evidence” – i.e., as a reminder to be patient in giving the bullish case the benefit of the doubt between now and December 31st, 2017.

The improper way to use this information is to assume that things are “All Clear” between now and the end of the year and that you can simply forget all about your stock market investments – because there can be countervailing influences.  To wit:

(See also Months to Beware of in 2017)

(See also Out With the Old, In With the, Uh-Oh)

(See also The Sordid Past of Years Ending in ‘7’)

Jay Kaeppel

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