According to Jeffrey Hirsch of the “Stock Traders Almanac” a Santa Claus rally might not be the right thing to hope for. Instead he’s got an eye on Jack Frost – the icon of January.
Why? Because in 31 of the last 36 years, a rally in January was followed by a full-year of gains.
“January is the first month of the year when people set their forecasts. And there’s the state of union address and important agendas laid out,” he says. All those things set the tone for the year.
He might be onto something. The January Effect is accurate 91% of the time.
Take a look.
Jan. Change Year Change
2004 +1.7% +9.0%
2005 -2.5% +3.0%
2006 +2.5% +13.6%
2007 +1.4% +3.5%
2008 -6.1% -40.31(YTD)
What’s the bottom line? As the S&P goes in January, so goes rest of year.
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Trader disclosure: On Dec. 24 th, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders: Najarian Owns (AMR) And Is Short (AMR) Calls: Najarian Owns (MSFT): Najarian Owns (XHB) Calls: Finerman's Firm Owns (AEO): Finerman's Firm Owns (MSFT) And (MSFT) Put Spreads; Finerman's Firm Owns (OIH) Puts; Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM), (BBT), (COF), (USO); Finerman's Firm Owns (ROH) Call Spreads; Karabell Owns (AAPL), (GOOG), (JPM), (CSCO)
Terranova Is Co-Portfolio Manager Of The Virtus Diversifier PHOLIO; Virtus Diversifier PHOLIO Owns (IGE), (DBC), (DBV)
Terranova Is Chief Alternatives Strategist Of Virtus Investment Partners, Ltd.: Virtus Investment Partners Owns More Than 1% Of (ABD), (ARE), (BIG), (OFC), (DLR), (EXR), (IGE), (MAC), (DBC), (DBV), (SKT), (UA), (CLB): Virtus Investment Partners Owns More Than 1% Of Seagate Tax Refund Rights
CNBC.com with wires