So far today's market action appears to be reasonably tame, with no economic data on the horizon, no real update out of Europe, rumors largely ignored at this point, and all signs indicating a quiet trading session for the rest of the day. But will it be? The only market veteran whose opinion actually matters, Art Cashin, says not so fast, especially if one looks at historical precedent, with a focus on 1987 (which incidentally is the last year in which the S&P moved up as much as it has YTD, only to culminate with Black Friday). Could it be that the quietest day ends up surprising everyone?
From UBS Financial Services
A Market Calendar Oddity – On this day (January 23rd) the market has done some strange, even zany things over the last several decades.
Particularly wild were the January 23rds of 1994, 1997 and the granddaddy of them all, 1987. Back in those days, we had five day settlement of stock trades. That meant, that given the weekend placement, January 23rd might be the last trading day to clear by month’s end.
Let’s look at the action on that day in 1987. It was a Friday, and with that five day clearance, it, in fact, would be the last trading day that would clear in January.
The market had been rallying for the New Year. To put things in better perspective, we’ll put the moves into the equivalent of current Dow points.
The day before (the 22nd), the Dow had rallied the equivalent of 306 points (a record at the time). Despite the prior day’s performance, the rally continued on the 23rd. By 1:30, the Dow was up another 380 points. Suddenly, it turned and dropped like a stone. In a matter of minutes, the Dow as at -306.
They circled the wagons and then began to race higher. In a stunning rally, the Dow was suddenly +65. Then, the trapdoor opened again and the Dow closed down 261 points.
The other January 23rd had similar whipsaw swings but in a slightly more muted fashion. Since we shortened the clearing cycle, January 23rd has been a good deal tamer. But for old fogey traders like yours truly, it’s still a day to carry a second rabbit’s foot.
This year it falls on Chinese New Year, a new moon, and a couple of astrological shifts. That helps focus one’s attention. It’s got mine.