(This is an excerpt from an article I originally published on Seeking Alpha on March 2, 2014. Click here to read the entire piece.)
“In many ways, February is the new January” so says Katie Nixon of Northern Trust.
And this seems like a rational reaction to the continued failure of the January barometer to predict anything meaningful. Last year, I wrote “The Problem With The January Barometer” to demonstrate the poor record of the famed barometer for predicting down years. Sure enough, January, 2014 delivered a 3.6% loss, but it turned out to be one of only four months in 2014 with a down performance. The S&P 500 (SPY) delivered a tidy 11.4% gain for 2014.
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Yet, pointing to a strong February as indicative of a strong year is just about as meaningless as using a strong January. Predictions of down years present a much more interesting challenge than the prediction of up years: the S&P 500 closes the year in the green the vast majority of the time. {snip}
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Ultimately, I prefer to think of the potential for drawdowns rather than try to pinpoint an annual gain on the S&P 500. Drawdowns help define risk and the scope of buying opportunities on the dip. {snip}
As the NASDAQ (QQQ) approaches the 15th anniversary of its all-time peak (closing high of 5050 and intraday high of 5133), I find it ironic that the tech-laden index is within “rally distance” of that peak in that same month of March…one of the least dangerous months of the year on average.
Be careful out there!
Full disclosure: no positions
(This is an excerpt from an article I originally published on Seeking Alpha on March 2, 2014. Click here to read the entire piece.)