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"The New January Effect? What Does the Return for January tell us about the Year? And Other Statistical Facts" submitted by IQS Quant.
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The question to ask is not "If January up, then is the year up?", but rather "If January up, then what about February through December?".
Shouldn't the first line of the report read from INVESTOPEDIA??
Now I'm going to bitch about it for seventeen posts like the poor fellow in the Argentina post.
"They didn't cite their sources, I'm a lawyer!"
This is the nonsense you posted a couple of days ago. Still waiting for that bloodbath.....yawn. Got gold???
by Master Bates on Mon, 01/25/2010 - 19:43 #205853Well, it's a lot like how any stock or index can't get past it's first level of resistance on the first time.
Tomorrow is going to be another bear bloodbath, which will be good for the dollar.
Maybe you haven't noticed the downtrend in stocks, uptrend in the dollar, and downtrend in gold lately.
I suggest that you read a newspaper or any financial journal if you're unaware of any of these trends.
Do you notice the resistance levels getting lower and lower in stocks, while the price of gold has gone down more than 10%? Maybe you don't, and that's probably why you hold gold in the first place!
Maybe I should purchase declining assets like gold instead of being short? That might not be too bad of an idea for Monday's bounce.
Still, 1226-1074 = 152 points decline for gold in two weeks!
152/1226 = 12.4% asskicking. OUCH! Not to mention the shooting star candle formed on the chart last week and the break of the primary trendline for gold.
Meanwhile... the dollar easily thwarted its 78 level resistance this week and is pushing 80 at 79.49 in its confirmed uptrend.
I'd say that I was pretty right homey! And just wait until spring...
Still, it's a losing proposition over time.
And I remember you goldbugs telling me I was stupid BEFORE the 152 point decline. I remember posting against gold, and having like 55 mofos being like "GOLD BITCHES" on my prediction that gold would come down.
And yet, that was at the peak of gold. Those people should have thanked me instead of ridiculing me. :)
Dumb post. Holding gold and shorting the market ARE NOT mutually exclusive. One can still hold gold and continue to buy PMs on the dips as commodities and equities decline all the while still shorting the S&P, etc. If you understand what is coming in the longer-term, these fluctuations in gold price are insignificant noise. This truly is one of the ultimate hedges - equities crash - > gold goes down as well (chance to buy more gold at cheaper prices (I also like silver)), and your short positions will pay off); if QE2 or any further type of "stimulus" money printing occurs, liquidity will continue to flood the markets, your shorts are worthless, but as we near great periods of inflation (potentially on our ways towards hyperinflation), your gold/silver will hold your purchasing power.
Dumb post. (What an ass you must be to say that.)
I'm just going to ask you one question. How do you know what is coming in the long term anyway? Are you some kind of wizard with access to a crystal ball?
Next, it's not like I hold shorts over time. Do you really think I would hold shorts in QE2.0? Am I going to hold short positions in every stock indefinitely? No! So why be long an asset class (like gold) indefinitely?
The difference between my style and yours is that I try to adapt to changing environments.
You (and everybody else) seem to believe that buying and holding gold is the only answer to preserving monetary value.
Three years ago, people believed that buying and holding real estate was the only solution to preserving monetary value.
Gold already had its run up, based on the fears of a declining world. While some people may believe that the world will end, and gold will be the only alternative, others like myself believe that it's just another asset bubble formed by the hoopla of the masses.
I know that it's wrong to buy assets when they are the most popular thing. When Glenn Beck is telling me to buy gold, I'm out. When my barber is telling me to buy gold, I'm out.
Who is going to sustain the indefinite price increases in gold? Is the demand going to increase permanently? Or will people simply dump it as an asset (like they did with oil contracts) when the bubble bursts?
When I hear people making ridiculous predictions about the price of an asset, I know that the bubble is almost near, or already ready to burst.
So when the asset bubble bursts, will gold still hold it's purchasing power? If gold drops to 600, will you still be happy you paid 1000 for it?
How do you know that the recent price fluctuations aren't the beginning of a downtrend? Your crystal ball? I guess crystal balls work better than TA and macroeconomic analysis.
I'm glad I didn't buy gold two weeks ago when every post on here was "GOLD BITCHES" because I'd be down 12% now. Instead I've made 20% shorting the market. Will I stay short forever? Nah. But would I stay long any asset forever? Nah.
Simply holding gold isn't the answer in a rapidly changing and fluctuating environment more than holding real estate or oil futures was the answer. And people actually NEED houses and oil. Can't really say that about gold.
"But gold preserves value more than any other asset." Does it really?
It's easy to say that when the market has a bunch of artificial demand because of chicken littles thinking the world will implode and the prices are remaining relatively high.
What happens when the pain starts and people liquidate their assets? Will it be any more valuable than oil or real estate was over a long period of time?
You can be entitled to your opinion, and I can be entitled to mine, but it's RUDE to call me dumb. At least I have more original thoughts in my head than "the sky is falling! Gold bitchez!"
Plus, I noticed that the gentleman that replied to my post originally reposted an old post that only showed I was RIGHT. It's funny when somebody reposts a prediction that I made THAT CAME TRUE to somehow argue that I'm wrong, when my prediction was in fact true. That just cracks me up.
"Where was the bloodbath in the stock market?" Ummm... do you watch the news? Gold was down 12% though. GOLD BITCHEZ indeed.
I did not call you dumb. I said it was a dumb post, specifically because you implied, by your earlier post, that holding shorts and gold were mutually exclusive. Simple principles based on logic would easily negate your argument. If it was an errant statement on your part, so be it - however, it was not accurate.
As to your feelings about gold, no worries. These are all opinions, if nothing more than by the very nature of posting on these blogs. While I do like PMs, I wouldn't consider myself a gold bug. My premise was merely to illustrate how gold (as one example) can be a very effective hedge in an increasingly unstable global economic environment. However, by your language it appears that you have a desire, no a need, to be proven right about things irrespective of the time frame. What's the saying? A broken clock is correct twice a day? Saying that gold has been down 12% in recent weeks somehow proves you to be correct? I think not. Perhaps when gold was around $300/oz at the beginning of the last decade to where it is now might be a better indication of a trend. Heck, check out gold's performance over the past decade vs. DOW, S&P, etc. - the results will be staggering, both in nominal AND in REAL terms (could this have anything to do with global fiat currency printing/"borrowing" over this timeframe? Hmmm.). Next, do a comparable analysis (compared to gold) on all fiat currencies and tell me after you use the correct inflation numbers (not the gov't. bullshit held low to trick the public and to pay out as little as possible in their under-funded social liability ponzi schemes based on COLA) that your purchasing power (choose USD if you must) hasn't eroded considerably in the past 10 years. Finally, primarily in the US (but also in many other nations), do you think the trend/direction of what is occuring in both fiscal and monetary policy is actually healthy for the USD or any other fiat currency for that matter?
Further, if I am correct in my opinion that there will be a deleveraging event and that gold will also fall in the short to intermediate timeframe, no I will not be unhappy that I purchased gold at $1,000 as opposed to your quoted $600 at then a later date. Would I purchase more gold at a cheaper price? Yes, I would. Gold, in my opinion, is insurance (specifically, physical gold). If I was more concerned about trading profits (which I am, though not in the case of PMs), I would consider GLD and SLV - these are short-term trading vehicles (neither stores of wealth nor insurance as they don't have a fraction of the gold they have sold as shares - please read their respective prospectuses and draw your own conclusions on recent COMEX settlement for delivery procedures). In this event of a short-term trading vehicle - you're damn straight I'd be unhappy about a 40% haircut in my GLD/SLV shares - but I don't use these vehicles anyway.
Lastly, I would not necessarily be long any particular asset class forever either. Yet, if the SHTF, I'm thinking that oil and real estate aren't exactly liquid. Though I am partial to those assets, one, in my opinion, needs to separate out that there are in fact two distinct bubbles presently. To speak of only an asset bubble is short-sighted. There is a debt problem that will not go away irrespective of how far down the equity markets go and should lead to bigger problems down the road. The treasuries/yield curve is now and should more into the future start to bring these dislocations to light. A deleveraging may, in fact, bring in more fundamental realities and even wipe out the insolvents that should've been taken out in 2008; yet, it does little (and only temporarily at that) to forestall an emerging dollar currency crisis due to the afore-mentioned debt burden. This is ultimately the rationale to have a longer-term view and the need to hedge one's portfolio with gold and/or precious metals of your choice.
Doc Brown seems to keep leaving stuff around too.
This link is only for Doc Brown. I like all the rest of you too much. Doc Brown is not stupid, but he is acting like an ass:
http://www.nicdirector.net/crackpad/
One could think of this as a new form of "paper" being proposed by the market, or perhaps a new security?
I logged in tonight and see all these cranky DB posts, and now some voodoo January Effect...all I can speculate is everybody must be getting stupid drunk. I'll call it the Friday Night Effect.
Maybe he is having problems in his personal life or something?
Poor fellow. I couldn't resist the urge to take a shot at him, but I still feel bad for him.
TEDIOUS person!
Equity indexes downtrend continues.
UPDATES:
http://www.zerohedge.com/forum/market-outlook-0
The January Effect actually refers to
according to Wikipedia.
Basically, buy on December close and sell by mid January. Which, if I may add, would have provided a roughly 3.5% gain on the long-side and 6% on short-side from the swing high (or mid-month) to month close.
I believe what IQS is referring to is what's known as the January Barometer which according to Investopedia is:
While these observations are interesting to read, they are ultimatley meaningless. The significance in this data is somewhere between data mining and correlations; neither one of which have predictive power.
Perhaps the fact that February has similar returns as January is b/c the two months are closely linked in time, and thus are exposed to the same economic effects and market sentiments; ie, it's not that January causes a positive or negative return for February (or rest of year for that matter), but that, likely, the same underlying causes are the basis for similar performance.
Again, interesting stuff, but not something I will be using for trading that's for sure. Cheerio.
The study isn't valid. It doesn't pull January out of the rest of the year. That is, it compares January to January-December. If I did that with random numbers, I would find a correlation between January and the rest of the year. In effect, he is comparing January with January and finding a relationship--amazing. Put another way, the variables are not independent.
The proper comparison would be January to Feb-Dec. Then, just to see if it's a "January" effect or if there is, say, a February effect, he could compare Feb to March-Jan. Repeat for each month and you have a valid study.
If this really has any predictive power it's because many market players foolishly think it does. The irrationality of some people amuses me. The same type of faulty logic and psychology spread the concepts of jinxes, curses, signs of bad luck, fortune telling, and technical analysis. The factors that contributed to the decline in January could have easily occured in any month.
And what's so special about a 50 or 200 day moving average? Why not 360, 180, or 90 instead? 200 is just an arbitrary number somebody pulled out of their ass. Any hope for such strategies relies on the irrationality of markets. Feel free to correct me if you like though.
A line of dow 10,000 has been drawn in the sand. Everything else does not matter. This is a big mind number for most. This coming week we will see just how strong the PPT is. If it starts heading south lookout. My guess is a positive week next week to cool things off.
I think that a positive retracement is indeed in the cards, just because the STO is getting so oversold, among other reasons.
It all depends on how high the bounce goes, really. I think that they had a bounce in the cards for Friday, but look what happened. The market recovered to where it wasn't so oversold only to plunge again once it got out of oversold territory.
Either way, I still think that there's some leg down before this current downtrend is over, I just don't think that it'll happen Monday necessarily, or even Tuesday, but we will make lower lows.
China seems to be issuing an ultimatum to USA over arms deal to TAIWAN. I wonder if CHINA will pull out their financial weapon of mass destruction, watch this news as it evolves. Nothing will cause problems in the Asia region more than this!
China summons US defence attache over Taiwan deal
Last Updated: 30 minutes ago
China says it will suspend its military exchanges with the United States over a multi-billion dollar American arms deal with Taiwan.
Washington had earlier said it would sell $US6 billion worth of weapons to Taipei - a deal which China warned would harm Sino-US relations if Washington did not revoke the deal..."
http://www.radioaustralianews.net.au/stories/201001/2805761.htm?desktop
Good, maybe we should stop selling China weapons because they are obviously not our friends...
"Hey, you guys are playing havoc on our economy... here's some weapons to kill us with if you get pissed off at us!"
The US Government is an addict and debt is the drug. China is our biggest (external) drug dealer, and they're realizing that our "debt abuse problem" is starting to seriously impair our ability to function. There is still lots of denial on our government's part and China can't get the US to "get on the wagon." With this in mind, the Chinese are trying to back away from us slowly, without getting themselves in a situation where they might, for example, leave their wallet out and find a few trillion missing.
Now whether China got us hooked on this debt deliberately is another matter entirely, but one has to admit it would be clever to take out a rival by keeping the value of your currency artificially low, encouranging them to move their manufacturing operations to your country (thereby wiping out their manfacturing base), then loaning them money so they could continue to buy stuff from you while they debased their currency. You could win without firing a single shot.
Master Bates, what's a good way to contact you?
certainly your choice of a moving average is totally arbitrary- also many momentum indicators are based on a derivative of a moving average... pick your fav. I submit that 50 and 200 DMA are popular as a 50 day refers to the average price for the quarter and 200 reflects the average price for the year. I also prefer 5 & 10 day short term averages to reflect average px for one and 2 weeks...20 day is popular for monthly guys...just another yardstick.
I tend to feel market manipulators can't rule in long term and I'm not surprised by what appears to be a bear market rally in spite of bad fundamentals and expect a return-to-fundamentals slide in equities this spring.. but I do like Ellen Brown's conjecture (and her refernce to Max Kesier) on what is going with latest market drop
GSacs vs MorganChase
http://webofdebt.wordpress.com/jpmorgan-vs-goldman-sachs-why-the-market-was-down-7-days-in-a-row/
Thanks moneymutt. Recently (over the last 1.5 years) I have come to the conclusion that the markets are rigged. I have lost all faith in them. I really struggle with what to do with my 401k. Mid forties, wife, two kids, good income, never been a big spender & have saved most my life. Yet some how I feel I will end up taking a beating. Good link just confirms what I have been thinking all along. Just don't know what to do & feel it is all going to end badly.
Just work until you die.
http://www.bankrate.com/finance/financial-literacy/work-until-you-die-a-...
I agree Onehunglow, it is all going to end badly. I too have a 401k that is in Fidelity money market and over the past two years has managed to eak out a 4.7% gain. I realize this is nothing, but it is better than losing it. Of course I am 15 years older than you, but I will continue to work as long as I can. I suspect that will only be another 3 or 4 years before I get replaced by someone cheaper.
"Fear the Boom and Bust" a Hayek vs. Keynes Rap Anthem
http://www.youtube.com/watch?v=d0nERTFo-Sk&feature=player_embedded#
A great article from the Columbia Journalism Review
Bloomberg’s Reilly Wrecks the Lex on Fed/AIG
and an interesting read on a sweetheart deal between GS and an AIG exec
AIG exec's big loan from Blankfein
The January effect??? What childish gibberish. The market is correlated to your BM.
Last year January was down and the yet the year was positive. I believe all the old metrics used in trying to figure out market direction got thrown out the window the minute the Government started handed out money @ 0% so the banks could pump and dump the entire market like it was a f_cking penny stock.
I also think that they'll drag the market down to S&P oh lets say around 1010 or 950 (worst case) just so they can pump it back up again (barring some catacalysmic catastrophe the S&P will probably close the year out around 1250.) Anyone who doesn't beleive that these motherf_ckers (the squid, Dimon, et al.) can do what they like (and they likes what they do) with the market these days is beyond niiave.
Not as dumb as it seems. This type of analysis applies in commodity markets, and have we reached a place where stocks trade like commodities? The constant slicing and dicing, not only of bonds, but of stocks, through indexes and subindexes, analyst ratings, etfs, and so forth, helps prove the point.
The stock market is a market where the product is investment paper. As long as people come to market with money, and the need to invest that money, Wall Street will fill those needs, and the market will go up. It's only when people don't have any money, or they think the price is too high, that they seek out alternatives.
When the market becomes corrupted by government intervention, and currency dislocations. Commodities eventually become synonmous with the paper money that is used to trade them, a failure in the money is a failure in the commodity. What happened to the stock futures market?
The invisible hand of government corrupted the fair value system which commodity markets require. Government seeks to inflate economic growth through monetary expansion, and create the illusion of progress, enpowering the political class, and spurring technology and investment.
The notion of price discovery, and mark to market runs counter to their purposes. A product becomes a commodity when that product is fully understood, and meets the criteria of uniformity in its class. The real thrust of progress, ratings agencies, financial wizardry, cause the stock market to commoditize, which supports the idea that the financial crisis was a preemptive government action, seemlessly supported by the political class in an election year, to protect their interests. The point is how long can they keep using their own money to buy their own investment paper, to artificially inflate market values, and price real investors out of the game??
Eventually they get tired of rigging the market, they try to bring in the taxpayer, who is ever more reluctant to support their action. At the moment of crisis they tore down the firewall which separates the assets of the investor class from the politically rigged investment banks. No coincidence there. The January effect is an indication that the real markets are pricing these assets correctly. Can the Fed and the political class they enable, continue to push the strings?? The rising level of sophistication in paper assets demands they be priced according the market, and the January effect is telling us, the markets work.
Colts victory in SB...Market down in 010
Onehunglow is right to be concerned. This time things are different. After 97 years of Fed tinkering, and with Greenspan and Bernanke at the wheel the past 23, this car won't run anymore.
The current account balance due 2010 on this lemon? “$14.3 Trillion or $102,142 for every worker, $408,571 for my family of four,” according to Nathan Martin's accounting.
And, now, to rev up this clunker, Obama has a “tax-cut road map.” A 2010 business pit stop for a $5,000 tax credit for each net new hire and maybe some SS tax credits on increased payrolls if a business will just please raise wages or increase hours for workers.
At the same time, on this road to serfdom, new union hires at Ford Motor Co., General Motors Co. and Chrysler Group LLC will earn about half what current workers received when they started--a little more than $14 an hour on average with reduced benefits.
Interesting, isn’t it? 1913 not only ushered in the Fed but Henry Ford’s moving assembly line that produced an affordable car and created an urbanized middle-class by creating an economic environment to create mass consumption. Ford’s idea was to produce high-quality cars, and pay his workers enough money so they could buy their own.
And so they did. Before Ford stopped making its affordable model T in 1927, 15 million had been sold.
When Ford introduced a $5 minimum wage a day in 1914, when the average wage in the automobile industry was about $2.40 a day, and reduced the working day from nine hours to eight it so shocked Wall Street that The Wall Street Journal called it "economic crime." Ford responded by increasing wages towards $10.
Things are different now, of course. Instead of a market invisible hand, the good ol’ USA has an invisible and grasping Fed hand. And things don't look so rosy.
As Jim Quinn said in Where Will US Job Growth Come From?:
“Despite the Federal Reserve’s extraordinary printing and the U.S. Government’s extraordinary spending measures during the last twelve months, it looks like the only job categories with growth potential are printing press operator, ditch diggers, ditch fillers, whatever they call the guys handing out trillions in government largesse, Treasury Department comedians tickling Chinese funny bones by saying they favor a strong U.S. dollar and people installing Stimulus signs at highway projects.”
Says Quinn:
“The signs are about taking credit. An acquaintance fairly high up in the Electrician’s Union told me about a big infrastructure construction project in Philadelphia’s Germantown section that has been underway for two years and is already nearly completed. A representative of the Federal Government recently entered the construction trailer and announced that the work was now a Federal stimulus project. A big sign then was put up at the site to prove it. Two years from now, expect Obama’s re-election campaign to claim this project as one of his stimulus accomplishments.”
http://www.lewrockwell.com/quinn/quinn21.1.html
The point of the New January Effect is that the directional move of the market in January seems to define the year. Those people looking for a free lunch, this is not meant to be a trading strategy, nor would anyone in their right mind post one.
For those that think - duh, of course January is highly correlated with the year return - the point is that January is more highly directionally correlated with the year return than any other month!
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