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Outlook ’09 – The January Effect
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Optimistic investors are still hopeful that the year will end with a Santa Claus rally. But maybe it’s Jack Frost who can rescue investors?
Is Santa Coming?
Although the term Santa Claus rally is used loosely, it typically occurs in the last 5 days of the year and the first two weeks in January.
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As we first told you Friday John Roque, Natixis Bleichroeder technical analyst anticipates the market could make gains through the end of the year. (Click here to see his analysis.)
However, Roque’s analysis sparked some – shall we say – skepticism.
Rick from NJ wrote, “Couldn't disagree more with your guest technical analyst. The charts I look at show the market unable to get more than 1000 points off its bottom and now beginning to roll over. I believe the third leg of the decline is imminent and we will see the first number of the DJIA be a "5" before a legitimate bottom is in.”
Welcome Jack Frost
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.
- Desperately Seeking Dividend Yield
- Tech Is Trying to Tell You Something: Terranova
- Charts Suggest S&P Revisits Flat on Year: Top Analyst
- Airlines Taking Flight?
- Three Stocks For Thursday
- Next Stop for Oil - $88.55
- QE3 Likelihood Still ‘Pretty Good’: Jan Hatzius
- Dennis Gartman Buying Gold and Stocks
- Doug Kass: Facebook Feels Like AOL Time Warner
- Guy Adami: A Real Life Iron Man
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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
Data is a real-time snapshot *Data is delayed at least 15 minutes
