Wednesday will be the 1st day of a new month. A couple of months ago I shared a chart that showed that the first day of the month has weakened substantially in recent years. Today I will use a couple of other charts to show just how drastic the change in market character has been. These charts compare the “1st of the Month” versus “All Other Days”. They show SPX points gained (or lost) for 2 time periods. The first one looks at 2000-2010. The 2nd one shows 2011 – present.

Quite the contrast. The first of the month used to be strong even when the rest of the time the market was struggling. But over the last 4+ years, “1st of the month” has failed to make any gains even though the overall environment has been strongly bullish. If “1st of the month” can’t manage gains in this environment, what will happen when the next bear market arrives?

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It is notable is that Friday is the last day before the President’s Day holiday. Historically the Friday before President’s Day has been a poor performer. But more recently the downside edge has not persisted. This can be seen in the curve below.

Market behavior changes over time. This includes seasonal tendencies. At this point I do not view the Friday before President’s Day as having any seasonal edge. Another example of seasonal behavior changes is the last day of the year.

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The January Barometer is a fairly famous study from the Stock Traders Almanac. It says that “as goes January, so goes the year”. In other words, a positive January will typically lead to a positive year, while a negative January can be a warning. Let’s look at how the SPX has done for the remaining 11 months of the year based on how January performed.

The numbers show that in years that January has done well, the rest of the year has typically fared well also. Below is a profit curve.

That is a nicely steady upslope. Now let’s look at how Feb-Dec has done after a down January.

Not as many instances, but there does not appear to be the same kind of bullish tendency here. More of a crapshoot. Below is a curve.

Certainly not a chart to trade off of. So it would have been nice if January finished positive. But it is not a sign of impending doom. Just that we don’t have the kind of momentum that would be preferable.

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Friday is the last trading day of January. The first day of the month is well known for having a seasonal bullish tendency. Interestingly, I have noted this tendency has not been prevalent over the last few years. This can be seen in the equity curve below.

As you can see, 1st day of month profits peaked 4 years ago. Leading up to that, the 1st day of the month had spent years as bullish. It is curious to see that this edge has not persisted during such a strong bull market, and it will be interesting to see if it re-asserts itself going forward.

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