Monday, February 3, 2014

The S&P 500 took a 3.56% loss for January. Yale Hirsch, of the Stock Trader’s Almanac fame, created the January Barometer where he coined the phrase “as January goes, so goes the year.” The barometer is simple, a positive January generally results a positive year and a negative January generally results in a negative year. Now with January’s decline, historical data suggests a greater than 50% chance 2014 will be a down year. 

Another study by Wayne Whaley, hat tip to him again, offers up an alternative method. Whaley’s study is called the Turn of the Year Barometer, and the study time periods are from November 19th of the prior year through January 19th. The significance of these dates is probably to take advantage of the bullish seasonal factors late in the year. Seeing negative market performance go against a typically bullish November – December period coupled with a negative January should not bode well for the market going forward – so goes the logic. 

Utilizing the table below, if the S&P gains more than 3% for the November 19th – January 19th time period, the full year performance is always positive going back to 1950 with one lone exception – 1987, which skewed a lot of studies. For 0-3%, the results oscillate wildly for the year but has an overall bullish tone. A negative performance during the study period will generally result in a down year. Every year since 2009 has seen 3% plus years, and the promise of a positive year was fulfilled. For the current study period, highlighted in yellow below, the S&P gained 2.6%, and as the study suggests, 2014 looks to be a wildcard.




Staying in a holding pattern unless SPX trades under 1767.99.

ImageImageDrawing on timeframe continuity, both the SPX 15/30 minute charts have recorded TD Buy Countdown 13 counts with limited results. The 60/120 minute charts are just about complete. If buyers cannot step up a notch and bring the SPX above 1794.16 today, the bears will continue to have the edge. 



Flip to neutral if daily SPX closes above 1794.19. 

ImageIf the bulls continue to defend the recent lows at SPX 1770.49, the next targets will be the 61.8 Fibonacci retracement area and TD Propulsion threshold level near SPX 1818. Closing above 1794.19 today will push this scenario closer to reality. 



Neutral if SPX weekly closes above 1842.27, most recent high close (updated January 27th.)



Flip to neutral if SPX closes below 1756.54.

ImageImageImageImageThe S&P has not seen a monthly price flip since August of 2012. A close below SPX 1756.54 will provide confirmation the price trend has at least reached a period of indecision. Related bearish flips are: Dow 15, 545.75, Nasdaq 3919.71, RUT 1100.15.






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