The January Effect

The old Wall Street saying "As January goes so goes the year."

At the last 30 years when the SP500 closed up for the month of January then 90% of the time it remain positive for the remainder of the year.

2007, 2006, 2004, 1999, 1998, 1997, 1996, 1995, 1993, 1991, 1989, 1988, 1987, 1986, 1985, 1983, 1980, 1979, 1976, 1975, 1972, 1971, 1967, 1966, 1965, 1964, 1963, 1961.

Only three cases where this effect failed and closed down for the year.
2001, 1994, 1966

When SP500 closed down for the month of January it doesn't necessary mean the rest of the year will be down. But since 1930 it usually does predict medium term weakness for the coming months.

In majority of cases, the SP500 closed lower within 1 to 3 months.
2009, 2008, 2005, 2003, 2002, 2000, 1992, 1984, 1984, 1982, 1978, 1977, 1974, 1973, 1970, 1969, 1968, 1962, 1960, 1957, 1953, 1948, 1941, 1939, 1935, 1932.

In rare cases it took a little longer before the SP500 made another monthly low.
1990, 1981 in 7 months. 1956 in 13 months. 1940 in 4 months.

Note that in 2009 the SP500 closed down for January and made a final low in March. Finally in my first post I have my medium term forecast for stock market weakness for the 1st half of this year. With the January Effect also hinting weakness (since the SP500 closed down for January) this reinforces my medium term forecast. Nonetheless, my short term forecast is for a rally.