S&P500 Down 12% YTD With Only Eight Sessions Remaining in the Month of January

The Dow Industrials thudded below 8,000 Tuesday, following through on the three consecutive lower closes during last week’s options expiration week. Institutional selling was heavy, with our TICKscore indicator settling at -70 and Cumulative TICK closing just below -100,000. It wasn’t a positive sign to see the Equal Weighted S&P500 underperform the SPX by such a wide margin Tuesday (100 basis points). That action triggers a two-day sell setup identical to the one recently discussed in my January 12th commentary.

With only eight days left in the month, and the S&P down roughly 100 points (or 12%) from its December close, it’s looking increasingly likely that the bullish ‘January Effect’ indicator will not be triggered this year. That’s unfortunate for market bulls, as an up January has a solid track record of leading to an up year. Here’s a look at the last thirty years in which the S&P was YTD positive at the end of January. Note that 90% of the time, the S&P was still trading in positive territory at the end of the year…

S&P500 Rallies in January
2007 – Forecast Up – Correct
2006 – Forecast Up – Correct
2004 – Forecast Up – Correct
2001 – Forecast Up – Incorrect
1999 – Forecast Up – Correct
1998 – Forecast Up – Correct
1997 – Forecast Up – Correct
1996 – Forecast Up – Correct
1995 – Forecast Up – Correct
1994 – Forecast Up – Incorrect
1993 – Forecast Up – Correct
1991 – Forecast Up – Correct
1989 – Forecast Up – Correct
1988 – Forecast Up – Correct
1987 – Forecast Up – Correct
1986 – Forecast Up – Correct
1985 – Forecast Up – Correct
1983 – Forecast Up – Correct
1980 – Forecast Up – Correct
1979 – Forecast Up – Correct
1976 – Forecast Up – Correct
1975 – Forecast Up – Correct
1972 – Forecast Up – Correct
1971 – Forecast Up – Correct
1967 – Forecast Up – Correct
1966 – Forecast Up – Incorrect
1965 – Forecast Up – Correct
1964 – Forecast Up – Correct
1963 – Forecast Up – Correct
1961 – Forecast Up – Correct

Additionally, it’s worth noting that a down January has a similarly strong track record of being a longer-term negative sign. It doesn’t necessarily indicate the year will be lower, but it’s a good bet that a down January will lead to at least one subsequently lower monthly close. The table below highlights every year since 1930 in which the S&P lost ground during the month of January. Note that in 29 out of 30 cases, or 97% of the time, the S&P posted a subsequently lower monthly close within the next seven months (usually within three)…

S&P500 Closes out January with a Loss
2008 – Lower monthly close in one month
2005 – Lower monthly close in two months
2003 – Lower monthly close in one month
2002 – Lower monthly close in one month
2000 – Lower monthly close in one month
1992 – Lower monthly close in two months
1990 – Lower monthly close in seven months
1984 – Lower monthly close in one month
1982 – Lower monthly close in one month
1981 – Lower monthly close in seven months
1978 – Lower monthly close in one month
1977 – Lower monthly close in one month
1974 – Lower monthly close in one month
1973 – Lower monthly close in one month
1970 – Lower monthly close in three months
1969 – Lower monthly close in one month
1968 – Lower monthly close in one month
1962 – Lower monthly close in three months
1960 – Lower monthly close in two months
1957 – Lower monthly close in one month
1956 – Lower monthly close in thirteen months (*)
1953 – Lower monthly close in one month
1948 – Lower monthly close in one month
1941 – Lower monthly close in one month
1940 – Lower monthly close in four months
1939 – Lower monthly close in two months
1935 – Lower monthly close in one month
1932 – Lower monthly close in two months

Categories : Archived EOD Commentary, End-of-Day Commentary

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