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Stock Trader's Almanac 2005
By Jeffrey A. Hirsch Yale Hirsch
John Wiley & SonsISBN: 0-471-64936-8
Chapter OneJANUARY'S FIRST FIVE DAYS AN "EARLY WARNING" SYSTEM
Of the 34 up First Five Days since 1950, 29 were followed by full-year gains for an 85.3% accuracy ratio and a 13.8% average gain in those 34 years. Of the five exceptions, 1994 was a flat year and four were war-related: Vietnam military spending delayed start of 1966 bear market; ceasefire imminence in early 1973 raised stocks temporarily; Saddam Hussein turned 1990 into a bear; and the war on terrorism, instability in the Near and Middle East and corporate malfeasance shaped 2002 into one of the worst years on record. The 20 down First Five Days were followed by 10 up years and 10 down (50% accurate).
In 8 of the last 13 Post-Election Years the S&P 500 posted a loss for January's First Five Days. Six were followed by full-year losses averaging -11.1%. 1993 rebounded 7.1% after the sluggish 1992 economy that factored into Bush Senior's ouster and 1985 followed the trend of no losing "5" years (see page 126). Five Post-Election First Five Days showed gains and only one subsequent full year, 1973, was a loser. This was the start of the previous major bear - caused by Vietnam, Watergate and OPEC. The other four years gained 22.6% on average.
JANUARY January first trading day Dow up 10 of last 15 MONDAY 3
A good new chairman of the Federal Reserve Bank is worth a $10 billiontax cut. - Paul H. Douglas (U.S. Senator, 1949-1967)
Second trading day Dow up 10 of last 15 TUESDAY often with larger gains than first trading day 4 Brazil is the country of the future and always will be. - Brazilian joke
Average January gains last 34 years WEDNESDAY
NAS 3.9% Dow 2.0% S&P 1.9% Up 24 Down 10 Up 23 Down 11 Up 22 Down 12 Rank #1 Rank #2 Rank #1
Excellent firms don't believe in excellence - only in constant improvement and constant change. - Tom Peters (In Search of Excellence) THURSDAY 6
If you are not willing to study, if you are not sufficiently interested to investigate and analyze the stock market yourself, then I beg of you to become an outright long-pull investor, to buy good stocks, and hold on to them; for otherwise your chances of success as a trader will be nil.
- Humphrey B. Neill (Tape Reading and Market Tactics, 1931)
January's First Five Days, an "Early Warning" System (page 14) FRIDAY 7
When I have to depend upon hope in a trade, I get out of it. - Jesse Livermore
THE INCREDIBLE JANUARY BAROMETER (DEVISED 1972) ONLY FIVE SIGNIFICANT ERRORS IN 54 YEARS
Our January Barometer, devised by Yale Hirsch in 1972, states that as the S&P goes in January, the year follows suit. The indicator has registered only five major errors since 1950 for a 90.7% accuracy ratio. Vietnam affected 1966 and 1968; 1982 saw the start of a major bull market in August; two January rate cuts and 9/11 affected 2001; and the market in January 2003 was held down by the anticipation of military action in Iraq. (Almanac Investor newsletter subscribers were warned at the time not to heed the January Barometer's negative reading as it was being influenced by Iraqi concerns.)
Including the six flat years yields a 79.6% accuracy ratio. A full comparison of all monthly barometers for the Dow, S&P and NASDAQ at hirschorg.com/2005p016 details January's market forecasting prowess. Bear markets began or continued when Januarys suffered a loss (see page 44). Excluding 2001, full years followed January's direction in the last thirteen Post-Election years. See pages 18, 22 and 24 for more January Barometer items.
JANUARY MONDAY 10
To affect the quality of the day, that is the highest of the arts. - Henry David Thoreau
When everybody starts looking really smart, and not realizing that a lot of it was luck, I get scared. - Raphael Yavneh (Forbes)
Things may come to those who wait, but only the things left by those who hustle. - Abraham Lincoln (16th U.S. President, 1809-1865)
Mate selection is usually a far greater determinant of individual well-being than stock selection. - Ross Miller (President, Miller Risk Advisors, Paving Wall Street: Experimental Economics and the Quest for the Perfect Market, December 2001)
There is only one corner of the universe you can be certain of improving, and that's yourself. - Aldous Huxley (English author, Brave New World, 1894-1963)
SUNDAY 16 (Continues...)
Excerpted from Stock Trader's Almanac 2005 by Jeffrey A. Hirsch Yale Hirsch Excerpted by permission.
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