Common sense always says the January Indicator makes no sense. I mean whatever happened at the end of the year before doesn't magically disappear the moment Kathy Griffin starts hurling expletives.
But whatever, Bubblevision keeps talking about it, so it must be true. Whatever happens the first week must decide the whole year. At least until they play the Super Bowl
At least what I thought. So thank you CXO Advisory for setting the record straight.
The final chart shows the correlations between the S&P Composite Stock Index return for each of the 12 calendar months and the return for the immediately following 11-month interval over the entire 1872-2008 sample period. It shows that returns for the months of April, May, August, November and December are about as good as the return for January in predicting returns for the ensuing 11 months. In other words, January is not special.
In summary, evidence from long-run data indicates that the January return for a broad U.S. stock index is weakly predictive of returns for the ensuing February-December. However, the predictive power of January is not appreciably greater in this regard than that of five other months.
Please click thru for the whole article, especially since their work is great and I re-ran their chart.
