You may have heard the old market proverb, “As January goes, so goes the year.” I prefer the saying, “as the first five days of January go, so goes the year.” We have now completed the first five days of January 2013, so let’s see how this barometer works historically. According to Stock Trader’s Almanac, 34 of the past 40 Januaries with a positive “first five day” period were followed by full year gains (for an 85% accuracy ratio). 2011 was the first time since 2002 when a positive “first five days” failed to predict an up year for the S&P [SPX], but 2012 managed to put the trend back on track. Specifically, the SPX rose 1.84% during the first five days in January of 2012, which foreshadowed the gain for the year of 13.41%.
Given that 2013 is a post-election year, it is worth noting the average performance for post-election years is 6.75%. But for the post-election years with appositive “first five day “period, the average gain is 22.8%. Hopefully that’s a positive sign for 2013.