USMarketView

January 30, 2009

The market lost substantial value since the beginning of the year; the summary statistics are the DJIA off  -8.8 percent, the S&P500 down    -8.6 percent and the NASDAQ  -6.4 percent lower.  Worse than this sorry result, is the repercussion on forecasts for the rest of this year.

Many investors pay some attention, at least to the rule of thumb that ‘the year goes the way January goes.’  Indeed, there is some correlation between January’s market action and the results for the rest of the year.  The diagram plots NASDAQ’s percentage changes in January against the percentage change for the whole year.

 

 About a quarter of the variations in December-to-December prices is associated with changes in the December-to-January results.  Moreover, for every one percentage point change in January, there is a  2.2 percent change in that year’s final performance.  The diagram reveals that relationship: the straight line running through the cluster of actual results is the estimated, statistical relationship.

The fact that the January and year pairs more often than not move in the same direction provides significance to the association.  Over the 27 years of this analysis, the changes of the January and year-end changes moved in opposite directions only nine times.  History reveals then that January’s result have a bearing in considering the market’s future.

 

 

DJIA               -1.82  percent

NASDAQ      -2.08  percent

S&P500         -2.28  percent

This entry was posted on Saturday, January 31st, 2009 at 12 032009000000Sat, 31 Jan 2009 15:39:52 +0000 and is filed under Market Report. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.