Stock Market Projections In January Are WRONG!
As January Goes, So Goes The Market
Really?
Well, were now at a magical moment in the stock market.
The first five days of January are passed and no doubt youre going to be hearing a ton in the news about the first five day indicator.
Whats that?
Its a famous saying on Wall Street as January goes, so goes the market.
Many old grizzled traders would tell you that the January market is a proxy for the rest of the year a great January means a great year and a bad January, well, run for the hills.
Most often youll see this tossed about in the first five days of the January trading session.
This Traders Tale has now shortened its time frame
Many traders now look at the first 5 days of January and then make their yearly predictions. I guess like everything in life, even the January stock market projections need to happen quicker!
So two questions come to mind
Whats the first five days of January 2015 telling us and more importantly what should we do about it
Five Days In January And 2015 Stock Market Predictions
So I took a quick look at the first five days in January for the markets
The first chart I checked out was the S&P 500.
As you know, this is made up of the largest group of 500 traded stocks on the exchange
As you can see over the first five days of 2015, the markets first plunged lower then rocketed higher closing slightly up. So does that mean the markets going to be up for the year?
So, does that change for us penny stock investors?
Lets take a look at our index of choices the Russell 2000.
As you can see from the chart, the Russell 2000, our measuring stick for the Penny Stock Market had the same market action a plunge followed by a massive rebound. But we didnt exactly rebound all the way back up.
Couldnt this be a crack in the markets with the small cap stocks failing to recover like their bigger brother?
The first five days of January isnt exactly the most telling of indicators and certainly no clarity from the charts
So is this a flashing green buy signal? Or is this a major warning of volatility in the market? Should we really head for a bunker?
Well, from my research, the answers not so clear.
Why January Stock Market Projections Are WRONG
I decided to do a bit of research on this topic.
I hit up our trusty Stock Traders Almanac (A great book by the way.)
And I checked the historical trends.
What I found wasnt surprising
In the last 24 years where the first five days were down only 11 times did the market follow suit.
So 45.8% of the time when the market was down for the first five days of January did the rest of the market do the same.
Thats less than 50%… or worse than just flipping a coin.
Just look at last year
The markets opened the first five days of the year with the S&P 500 showing a loss of 0.55%… yet the markets jumped 11.39%!
Thats why, while the January stock market predictions are interesting to look at, you shouldnt give them much credence at all
And as a result, you can and should ignore the whimsical projections of traders and market watchers who say the first five days of January matter!
Now I will say this while the January 5-day indicator isnt looking very reliable, the interesting divergence in the penny stock and large cap markets gives me pause and is telling me to keep my eyes on things.
Good trading
Brian Kent
Penny Stock Research
Note: Brian Kent has been trading the markets for more than 2 decades and now writes and edits for PennyStockResearch.com. You can sign up for the penny stock research newsletter a trusted source for the truth about penny stocks! Sign up today and get a free research report – http://pennystockresearch.com/free-reports/
Category: Trading Penny Stocks
