What stock-market investors need to know about the ‘January Indicator Trifecta’ – MarketWatch
The U.S. stock market got off to a bumpy start in 2023. A bearish backdrop means investors looking to a popular January indicators to clues to how the year will pan out should approach the data with caution, analysts said.
The Santa Claus rally, the First Five Days Early Warning System, and the January Barometer are three seasonal indicators recorded by Yale Hirsch in his Stock Trader’s Almanac in 1972, which constitute what is known as the January Indicator Trifecta.
See: Here are five stock-market ‘early indicators’ that could decide the fate of your portfolio in 2023
Santa’s late gift
At the end of the second trading day of a new year, stock-market investors usually tally up what’s known as the “Santa Claus rally”, which refers to the stock market’s tendency rise in the last five trading sessions of the year, plus the first two sessions of the new year.
A failure to rally during the period is seen as a sign that further selling is likely in store.
This year, though Kriss Kringle did make a stop at Wall Street, he did not reward investors with anything big to start the year. The S&P 500
SPX,
-1.14%
gained merely 0.8% during the most recent Santa rally period that concluded Wednesday, versus a long-term average of 1.3%. The Dow Jones Industrial Average
DJIA,
-1.24%
advanced 0.7% but the Nasdaq Composite
COMP,
-1.10%
dropped 0.2%, according to Dow Jones Market Data.
“It was a choppy ride this time around, but the S&P 500 found some footing Wednesday… Including this year, Santa has paid Wall Street a visit 59 times since 1950,” wrote Jeff Hirsch, editor-in-chief of the Stock Trader’s Almanac and Almanac Investor, in a Wednesday note.
U.S. stock indexes finished higher on Wednesday, snapping a two-day losing streak as investors assessed Federal Reserve meeting minutes that showed none of the policymakers expect any interest rate cuts in 2023, as they awaited more evidence that inflation was on a sustained downward path.
January’s first 5 days
A late but positive Santa Claus rally is encouraging for stock-market investors, but they will be looking for more clarity when January’s “First Five Days Early Warning System” gives its reading later this week and when the “January Barometer” reports at the end of this month.
According to Stock Trader’s Almanac, the first five trading days of January …….