An Early Look at the January Indicator

One of the most commonly referred to historical stock market ‘indicators’ is so goes January so goes the year. Being a numbers guy I like to check these sorts of things out on my own. There are still eight trading days left in January, but right now January is looking like a bullish start to the year with the S&P 500 up about 4.2% for 2013. There is S&P 500 index data available from 1950 so I have 63 years to work with and the results were a bit interesting. 

Of the 63 years I have data for there have been 39 higher months and 24 lower Januarys. Of the 39 years where January was higher, there were 34 incidents of the S&P 500 closing higher for the remaining 11 months of the year. That means about 88% of the time the stock market moves up in January the market is up for the remainder of the year. On the flip side of the 24 occurrences where the market was lower in January the market was lower only 11 times. This means on the bearish side, this January indicator has only been accurate about 45% of the time. 

So it appears the January indicator is good for a bullish outlook, but does not tell us too much on the bearish side. In eight days we will know whether January is giving us our 40th bullish indication. Then a few days after the end of January we can discuss the Superbowl Indicator. If you are bullish on stocks root for the 49ers, if bearish then the Ravens are your team.