In the 2/3 blog I examined the “January Barometer”.

As a super-quick review, the January Barometer suggests that a positive January will very often be followed by the next 11 months closing out the year positively. A down January (like we had this year), has led to more inconsistent returns. Use the link above for the details.

When I ran that test I also looked at other months. What I found was that a strong February actually predicted a strong next 11 months better than any other month. Below are the February results.

The numbers here aren’t massively better than a “January Barometer”, but if you like using a month as a barometer, February appears to be the best one. And the edge has been even stronger since 1988. Below is the list of instances over the more recent time period.

As you can see, 2011 was the only recent loser, with 14 of the last 15 positive Februaries leading to gains over the next 11 months.

This is not a study I plan to rely on for establishing a market bias. I view this more as an academic exercise. A few reasons for this: 1) I don’t like the way the test was developed. I did not start with a reasonable premise and test it. I data-mined to find the best month. This approach does not give me confidence in the results. Some month is bound to be best, and it could be nothing more than random noise. 2) I see no reason that February’s results should be predictive of the next 11 months. You could argue that momentum at this time of year may carry through nicely, but I think that is likely a weak explanation. I suspect this study is only slightly better than the Super Bowl indicator or the Sports Illustrated Swimsuit Cover indicator. But I did find it interesting, so I thought I would share it.

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Today is the last day before the President’s Day holiday. Over the last 22 years the Friday before President’s Day has been a poor performer. I showed this a couple of years ago in the 2/17/12 blog. I have updated the results in the table below.

Inclinations appear squarely bearish. Not shown above is that the average run-up has been 0.2%, and the average drawdown has been -0.9% over the years. Additionally, 2003 (+2.14%) was the only year that closed up more than 0.25%. The other 4 years in which SPX closed positive saw very small gains.

Also…Happy Valentine’s Day!

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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.

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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Martin Luther King Jr. Day was on Monday. The NYSE has only observed MLK Day as a holiday since 1998. But over that 16 year period the market has not done too well during MLK week. I showed this last year in the 1/22/12 blog. I’ve updated the chart below.

MLK week has seen the market rise the last couple of years, but prior to that it had some real struggles. Maybe the downside tendency is fading, or maybe it was just a blip and the downward inclination will reassert itself. It’s tough to tell at this point. I’m still inclined to view seasonality as favoring the bears this upcoming week.

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As I discussed last month, opex week in December has historically been wonderful. But January – not so much. Below is a list of the last 15 January opex week returns (updated from the study shown last year). While it is not the case this year, January opex week often occurs in conjunction with Martin Luther King Day. So some of these weeks contained four trading days and some contain five.

Even with the positive performance the last 2 years there has been a decided downside tendency over the last 15 years.  The drawdown / run-up stats at the bottom remain quite compelling for the bears.  This study still appears worthy of some consideration.

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I’ve discussed many times in the past that Tuesdays have a well-earned reputation for being a day when the market will often halt a decline. The study below is one from the larger Turnaround Tuesday study published in the 9/25/12 blog. All statistics are updated.

As you can see the market has strongly favored a quick move higher. And when that move hasn’t happened on Tuesday it has often happened in the next few days.