Globe editors have posted this research report with permission of Phases & Cycles. This should not be construed as an endorsement of the report’s recommendations. For more on The Globe’s disclaimers please read here. The following is excerpted from the report:
An old Wall Street adage states that the first five days of the year will indicate the direction of the market for the year. According to the Stock Trader’s Almanac, “when stocks finish the first five days higher, the SPX has been positive more than 80 per cent of the time at year-end, with an average gain of about 13 per cent.” The chart on page 3 of this report shows how this has turned out since 2008. For the record, the first five days of 2021 were positive, as the SPX rose 1.8 per cent and the TSX gained 3.5 per cent.
Wall Street has another favourite seasonal gauge, the January barometer, which states that “a higher January should mean a higher year,” or, as the Street puts it, “So goes January, so goes the year.” We are anxiously waiting to see the closing price of the indices at month-end.
Notwithstanding the proverbs quoted above, we forecast market behavior using different tools than folklore. Our most effective tools are the study of market cycles and the analysis of investor behaviour.
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