Seasonality Trends 201: The S&P 500 January Barometer
Now here's a seasonal trend that is worth keeping note of at the beginning of each calendar year. In my opinion, this January reading is the most important seasonal indicator that exists across markets.
The reasons are two-fold:
1) When net bullish readings (At least 2/3 Components are bullish signaling) occur, the probability that the remaining calendar year for SPX (February - December) will be net positive 90.5% of the time.
2) When net bearish readings (2/3 Components are bearish signaling) occur, the average return for SPX over the proceeding calendar year (Feb - Dec) is a perturbing (1.2%) loss. When net bearish readings (3/3 Components are bearish signaling) a stunning (7.5%) loss is registered on average, since 1937.
Yale Hirsch was the first to recently discover this seasonal phenomenon in 1972. Since then, numerous studies have been conducted to test the statistical significance of this apparent view into the market's future. Not only has every study published since the trend's incumbency proved statistical significance, but many enthusiasts have also developed various strategies that would have yielded astronomical returns since 1972 if followed in a disciplined manner.
Given the significance of this extraordinary seasonal finding, I find it most cautious that we have a majority bearish reading for January 2021. Moreover, we nearly hit a trifecta of bearish components, as the first trading day of the month was quite red this year.
Hope this glimpse into seasonal predictive power can provide some support for trading decisions made in 2021. At the very least, I hope this provided some interesting content for further discussion.
-JanuaryIsAkwaysPiggish
SPX
The reasons are two-fold:
1) When net bullish readings (At least 2/3 Components are bullish signaling) occur, the probability that the remaining calendar year for SPX (February - December) will be net positive 90.5% of the time.
2) When net bearish readings (2/3 Components are bearish signaling) occur, the average return for SPX over the proceeding calendar year (Feb - Dec) is a perturbing (1.2%) loss. When net bearish readings (3/3 Components are bearish signaling) a stunning (7.5%) loss is registered on average, since 1937.
Yale Hirsch was the first to recently discover this seasonal phenomenon in 1972. Since then, numerous studies have been conducted to test the statistical significance of this apparent view into the market's future. Not only has every study published since the trend's incumbency proved statistical significance, but many enthusiasts have also developed various strategies that would have yielded astronomical returns since 1972 if followed in a disciplined manner.
Given the significance of this extraordinary seasonal finding, I find it most cautious that we have a majority bearish reading for January 2021. Moreover, we nearly hit a trifecta of bearish components, as the first trading day of the month was quite red this year.
Hope this glimpse into seasonal predictive power can provide some support for trading decisions made in 2021. At the very least, I hope this provided some interesting content for further discussion.
-JanuaryIsAkwaysPiggish
SPX
