Tuesday, January 4, 2011

A Tough Streak After Positive First Days

Last year I showed how the SPX has performed after the first day of the year was positive. Often you see a couple more days of upside followed by a selloff. In fact, there has been quite a streak of January dips after strong first days. Below are the last 10 instances going back to 1988, and their 13-day returns.

Most instances showed a decent amount of runup prior to the market rolling over. In fact the last five instances, starting in 2002 and ending in 2010, all saw the market rise 1%-3% before the move down ensued.


fiz said...

So there's 10 instances in like 23 years how is that a "streak" just saying

Rob Hanna said...

Those are all the instances where the SPX rose on the 1st day of the year. The study filtered out instances where the SPX dropped on the first day of the year.

So every time it rose on day 1 is listed. They all were followed by pullbacks.

fiz said...

I gotcha..I read that too fast. So the market may also very well test yesterday's highs before a rollover ensues. Nice work I enjoy your blog :)

Michele said...

I'd be curious to see how this pans out for the whole month of January, not just the first 13 days. According to The Stock Traders Almanac, the last four trading days of the month tend to significantly outperform. In fact, historically, day 13 is the worst day of January and day 14 is the last significant losing day of the month.

Day 13 this year is January 19th. The Dow has been "down big" 8 of the last 11 years on this day, or so says The STA.

D Jones said...

Actually, if my understanding of this particular test is correct, 13 trading days after trade implementation is Friday, Jan. 21. SPY must drop over 10 pts. in order to keep this streak alive. Stocks are trading higher overnight on Fri. a.m., so it will be interesting to see how this plays out.

Rob, please correct me, if necessary.
Nice work.