January 2, 2009
The past three days have been spectacular: the NASDAQ gained more than eight percent since Tuesday, while the S&P500 moved up seven percent and the DJIA rose 6.49 percent. It is unusual, indeed, for the three indices to put together three positive days in a row. It has happened only 46 other times since January 2000, a total of 2.04 percent of all trading days.
Moreover, only two of these three in a row runs, in 2001 and 2005 occurred in January. While values rose three percent in 2005, they declined thirteen percent in 2001.
Moreover, no meaningful results result from using the first trading day of the year as a forecaster of what the year will bring. In negative years, the first trading day in January declines as often as it increases. While in positive years, the ratio of declines on the first day is 53 percent while only 47 percent are increases.
There is one curiosity in the NASDAQ index; it declined on 61 percent of the first trading date when the year posted gains, and increased 56 percent in the years when prices declined.
A reasonable conclusion is that the first trading day of the year has little relevance in predicting what will happen to prices in the rest of the year.
DJIA 2.94 percent
NASDAQ 3.50 percent
S&P500 3.16 percent