My friend Jeff Hirsch keeps an excellent blog over at Stock Traders Almanac which serves as both a great companion to his annual almanac and a fun standalone reference for investors and traders.
Here’s what he’s saying about Januaries throughout market history:
January is a solid month for market performance as an influx of cash from yearend bonuses and annual allocations typically propels stocks higher. January ranks #1 for NASDAQ (since 1971), but fifth on the S&P and sixth on the Dow since 1950. It is the end of the best three-month span and possesses a full docket of indicators and seasonalities.
The first indicator to register a reading is the Santa Claus Rally. The seven-trading day period begins on December 23 and ends on January 4. Normally, the S&P 500 posts an average gain of 1.6%. A failure to rally tends to precede bear markets or times stocks could purchased later in the year at lower prices.
A developing trend, since 1999, is the tendency for the market to weaken substantially mid-month.