Educate Yourself - The January Barometer

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The January Barometer
Brian Trumbore
President/Editor, StocksandNews.com

An old saying is that as January goes, so goes the year. And according to the Stock Trader's Almanac, since 1950 the January indicator has only five major errors for a 90.9% accuracy ratio. "Vietnam affected 1966 and 1968; 1982 saw the start of a major bull market in August; 9/11 affected performance in 2001; and the anticipation of military action in Iraq held down the market in January 2003."

If you include the six flat years, the barometer's accuracy ratio is 80% (the more common measurement).

So I thought we'd just look at the past six years, specifically, including two of the major mistakes; while throwing in gold and oil just for the heck of it.

????S&P 500?Return for the year*??..Gold?.Oil

12/31/99?1469????????????..$289?$25.20
1/31/00?..1394?-5.1%.......-9.1

12/31/00?1320?????????????272?.26.80
1/31/01?..1366?+3.5%......-11.9

12/31/01?1148?????????????279?.19.84
1/31/02?..1130?-1.6??..-22.1

12/31/02?.879?????????????.347?..31.20
1/31/03?...855?.-2.7??..+28.7

12/31/03?1111?????????????416?..32.52
1/31/04?..1131?+1.7??.+10.9

12/31/04?1211?????????????438?..43.45
1/31/05?..1181?-2.5??..+4.9

12/31/05?1248?????????????519?..61.04

*For the yearly return, I include dividends. Stock Trader's Almanac does not.

The January barometer is but another tool, albeit an important one particularly when the geopolitical scene is sanguine. However, we have a far from sanguine environment today, I would argue.

Sources: "2006 Stock Trader's Almanac," Yale Hirsch & Jeffrey
A. Hirsch?and?my own archives for the gold and oil data.

Wall Street History returns next week.

Brian Trumbore

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