{"id":37533,"date":"2017-01-10T18:21:59","date_gmt":"2017-01-11T02:21:59","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=37533"},"modified":"2017-01-10T18:21:59","modified_gmt":"2017-01-11T02:21:59","slug":"let-2016-be-year-january-barometer-died","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2017\/01\/10\/let-2016-be-year-january-barometer-died\/","title":{"rendered":"Let 2016 Be the Year The January Barometer Died"},"content":{"rendered":"

(This is an excerpt from an article I originally published on Seeking Alpha on January 9, 2017. Click here to read the entire piece<\/a>.)<\/strong><\/p>\n

Two years ago, I wrote “The Problem with the January Barometer<\/a>.” {snip}… the January barometer failed one more time with 2016 delivering a stellar 9.5% gain. Hopefully, 2016 helps put the January barometer to rest. In fact, perhaps the January barometer could better be stated as “buy the dip at the end of a down January.”<\/p>\n

So let’s review the updated numbers.<\/p>\n

{snip} Regardless of any given month’s performance, you can simply bet on an up year.<\/p>\n

{snip} Since there are only 18 negative years since 1951, I can use a heat map to compare the performance of each month of a negatively performing year to see whether there is even a chance of getting a reliable prediction. {snip}<\/p>\n


\n
\"When<\/a>
When the S&P 500 has one of those rare off years, we should expect to see a lot of negative months. Some months tend to fare worse than others.<\/figcaption><\/figure>
\nSource for prices: Yahoo Finance<\/a><\/strong>
\n<\/center><\/p>\n

{snip} The following chart shows the rate of false positives by month (red bar, left vertical axis) alongside the total number of months with negative performances (black dots, right vertical axis).<\/p>\n


\n
\"There<\/a>
There is no month that provides a reliable predictor of a negative year because the rate of false positives is too high.<\/figcaption><\/figure>
\n<\/center><\/p>\n

Finally, just to underline the weakness of the January barometer, I generated a bubble chart of the January barometer married to the performance of February. {snip}<\/p>\n


\n
\"Little<\/a>
Little correlation exists between the performance of January and the year even when accounting for February’s subsequent performance.<\/figcaption><\/figure>
\n<\/center><\/p>\n

Bottom-line: the failure of the January barometer in 2016 essentially confirms its lack of usefulness. The barometer would be much more useful as a buying signal to get the year’s performance at a likely discount. Going into 2017, my trading focused on confirming (calendar-independent) signals that are flashing bearish. I describe my latest assessment in “A Surprising Bearish Divergence for the S&P 500<\/a>.” I was expecting a fresh breakout to new all-time highs on the S&P 500 to refresh the bullish signs in the market that were in place in the days preceding the U.S. Presidential election<\/a>. Instead, I found surprising signs of underlying weakness. Regardless of the way these signals resolve, I recognize that resolution into a negative January performance will NOT reliably predict a negative year. <\/p>\n


\n
\"The<\/a>
The S&P 500 (SPY) broke out of a Bollinger Band (BB) squeeze and printed a new all-time high.<\/figcaption><\/figure>
\nSource: FreeStockCharts.com<\/a><\/strong>
\n<\/center><\/p>\n

(For those interested, you can click here<\/a> to download and review the Excel spreadsheet I used for this analysis).<\/p>\n

Be careful out there!<\/p>\n

Full disclosure: long SDS<\/p>\n

(This is an excerpt from an article I originally published on Seeking Alpha on January 9, 2017. Click here to read the entire piece<\/a>.)<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

(This is an excerpt from an article I originally published on Seeking Alpha on January 9, 2017. Click here to read the entire piece.) Two years ago, I wrote “The Problem with the January Barometer.” {snip}… the January barometer failed one more time with 2016 delivering a stellar 9.5% gain. Hopefully, 2016 helps put the … Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[997,1210],"tags":[998,65,362],"class_list":["post-37533","post","type-post","status-publish","format-standard","hentry","category-sp-500-analysis","category-trading-model","tag-correlations","tag-sp-500","tag-spy"],"yoast_head":"\nLet 2016 Be the Year The January Barometer Died - ONE-TWENTY TWO: Trading Financial Markets<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/drduru.com\/onetwentytwo\/2017\/01\/10\/let-2016-be-year-january-barometer-died\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Let 2016 Be the Year The January Barometer Died - ONE-TWENTY TWO: Trading Financial Markets\" \/>\n<meta property=\"og:description\" content=\"(This is an excerpt from an article I originally published on Seeking Alpha on January 9, 2017. 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