Since 1950, the Standard & Poor 500’s performance in January of each year has been a pretty accurate indicator of how the stock market would perform for the entire year. There were only six years when the S&P 500’s January results went in one direction and the index moved significantly in the opposite direction for the full year, a forecasting accuracy of 90 percent. This history has been thoroughly discussed in the January 10, 2010 Pittsburgh Post Gazette. The Market Oracle in the UK wrote about the same phenomena on January 6, 2010. Even Mark Hulbert acknowledges the history of the January indicator although he does point out some flaws that I have not been able to verify.
January 2010 has been dismal for the market. Let’s face it, the economy sucks. I will be watching for growth indicators but right now the January theory is the one I will follow.
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