January barometer - An indicator for stocks, but maybe also for crypto

There are different techniques and market signals out there that can be a telling for what's to come during a new year in the financial sector. And one of them is extrapolating the results by the end of the month to if this will be a good or bad year overall. And behind this stands the is called January barometer which considers that the performance of the stock market in January, foreshadows it's annual movement.

January barometer

There are some stats behind it that provide some evidence in this belief, even if this might be at a more superficial layer. A fact supporting this is the analysis made by Christian Galipeau of Putnam Investments between 1950 and 2000, which revealed that S&P 500 provided a +17.6% return during the year when it rose in January.

January 5-days trend

Another technique, but even more radical, considers only the first five days of the trading in the beginning of the year in order to signal the overall market direction for the entire year. The stats are telling us that when S&P 500 rose during the first five days, the results were of +14.3% return for the whole year. Not too shabby either in my opinion.

Accuracy

With the tumultuous social and economical context, the indicator seem to have lost from its accuracy, but still providing positive returns when applied. It seems that getting into stats in between 2000 and 2023, when we saw a rise in January it resulted in a +9.7%, but this including counting dividends earnings.
Overall I think that the January barometer can still be a good indicator for what's to come for the rest of the year. This applies as a whole, while we can see extremes from one stock to the other.

Stocks and crypto correlation

In the same considering that nowadays there is a strong correlation between stocks and crypto, the January barometer can be used also as a trend for the crypto space for the year. Of course there are also big events that can boost these trends - like the Bitcoin ETF which was approved, Bitcoin halving and Ethereum ETF - but we need to start from somewhere. Reading the market is not an easy thing, but using such indicators might help along the way.

Some news fresh out of the oven tells us that the S&P 500 just reached a new All Time High, which might pave the trend that we'll see for the year. Some say that the bull run (in crypto, but also in stock) is to come next year, but seeing such spectacular results at the beginning of the year I cannot but wonder if that will come earlier. I see quite many positive signs that could support that, but the entire macro space is quite difficult at the moment to anticipate anything. But there is hope nevertheless.

As I stumbled upon this new financial notion, I felt that it would be useful to share it with you. In addition to that I wonder what indicators or signals you are using to anticipate market movements. Feel free to add your comments to strategies in this regard. Sharing is caring!

Posted Using InLeo Alpha