Rally or Fall — this week should tell

I’m don’t pay much attention to the month of the year predictors for the stock market such as “As January goes, so goes the year”. As this post points out, the statistics are hardly overwhelming.   There are tax and cultural reasons (year end, lots of time off/holidays) that reasonably give December and January some seasonal effect, but as far as predictors go, it is hard for me to see how one month can set the trajectory in a causal sense for an entire year.  I don’t give a lot of credence to matching charts from years past either, but if they are similar situations (e.g., bull market recoveries after a severe bull market) I do think they have some predictive power.

I updated my 2004 to 2010 S&P 500 comparison with another week of data.   In 2004 it wasn’t until August that there was a correction of the magnitude we saw last week.  We are within a 1/2 point of exceeding the low point of 2004 of $107.    The normalized volume correlation between the two years continues to be good,  we will see if we bounce back from corrections like we did in 2004, or are we looking at fearful times ahead..

SPY28Jan10


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