Stock Market Analysis

Sunday, January 31, 2016

How January Ends, So Will The Year?

"How January Ends, So Will The Year..."

This is an old stock market adage I have heard since the day I started learning about the market decades ago (In case you guys are wondering from my young looking photo, I turn 41 this year). January 2016 ended badly, as expected. The SP-500 was down a whooping 138 points or -6.65% in the biggest monthly drop since August 2011. Looking at the high and low, the SP-500 dropped by over 260 points over the course of the month before closing higher in a negative range that is not seen since the great bear month of October 2008. Yes, things looked very bad for January 2016 and if the old adage is anything to go by, this year will go down really bad too.

However, how reliable is this old adage? Looking back in the past two decades, we actually saw that there are insignificant correlation between how January ended and how the year ended. In fact, many negative Januaries closed the year positive too. How was prevalent was actually the market cycle. In a bull cycle, Januaries that closed positive tend to close the year positive, fulfilling the adage. Januaries that closed negative actually tend to close the year positive too, breaking the adage. In fact, the only times negative Januaries actually reliably resulted in a negative year was when it was a market crash year. Looking at these findings, one can easily see that this adage doesn't really stand the test of time but rather depended on the market cycle for its fulfillment. Which means that ultimately, the market cycle is King as I have always believed. Which was the basis for my bear market 2016 prediction I made last year.

(Wanna learn how I read the market cycle? Join my Star Trading System training course now!)

So, January 2016 ended negative. Will 2016 itself also fulfill the prophecy and end negative? I do think so strongly. In fact, I think what is to come is the perfect storm of recessions as many of the factors that individually resulted in past recessions come into play all at once this time. Are you ready for the perfect storm?

Market Crash Timer: RED

For now, the market remains in short term bull trend within an intermediate bear trend and primary neutral trend.

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