#first five days

My father Yale Hirsch invented both of these well-known seasonal indicators in 1972 and published them in the 1973 Stock Trader’s Almanacas you can see in the picture above on pages 11 and 111. He passed away late last year at the ripe old age of 98. Not only was he the illustrious founder of the Stock Trader’s Almanac, but he left me and everybody on the planet a rich legacy of seasonal patterns, strategies and indicators. Many of which he discovered, invented or devised. He also brought others to light with clarity and always full credit of course. And most importantly, from the first Almanacin 1968 Yale taught us all how to think differently about the markets and recurring market patterns. Thanks to him we have a plethora of tools in our analytical and statistical arsenal.

To quote the great Sir Isaac Newton, “If I have seen further, it is by standing upon the shoulders of giants.” We proudly stood on Yale’s giant shoulders when we created our “January Indicator Trifecta” back in January 2013. Which brings us to the present.

Combining our three January indicators, the Santa Claus Rally (SCR), First Five Days (FFD) and January Barometer (JB), into the “January Trifecta” has proven to be an especially reliable gauge for future market performance. When all three are positive, as was the case in 2019, the next eleven months have been up 87.1% of the time with an average gain of 12.3% and the full year advanced 90.3% of the time with an average S&P 500 gain of 17.5%. The worst full-year decline in a year with a positive January Trifecta was 13.1% by S&P 500 in 1966.

With less than two hours left in the First Five Days, S&P 500 will need to gain more than 70.13 points (1.49%) by the close to keep the bullish January Indicator Trifecta alive in 2022. Since the odds of that happening are slim at this juncture that leaves three possible scenarios for our “January Indicator Trifecta:” SCR up and both FFD and JB down (8 occurrences since 1950 with last 11 months up 2/down 6, average -5.8%, full year up 1/down 7 average -9.4%); SCR up, FFD up and JB down (12 occurrences since 1950 with last 11 months up 10/down 2, average 9.9%, full year up 9/down 3 average 6.0%); or SCR up, FFD down and JB up (6 occurrences since 1950 with last 11 months up 5/down 1, average 9.7%, full year up 5/down 1 average 11.8%). So, two out of three ain’t bad. (See the tables below.)

Wednesday’s market decline was triggered by a much more hawkish Fed perception following the release of last month’s FOMC Meeting minutes. A more aggressive removal of Fed liquidity could aid in pulling back inflation and it could pressure stocks as bond yields rise. We will withhold final judgement until the final results of the January Barometer arrive. Our base case scenario from our 2022 Annual Forecast is still our pick at this juncture.

As the opening of the New Year, January is host to many important events, indicators and recurring market patterns. U.S. Presidents are inaugurated and usually present State of the Union Addresses. New Congresses convene. Financial analysts release annual forecasts. Residents of earth return to work and school en masse after holiday celebrations. On January’s second trading day, the results of the official Santa Claus Rally are known and on the fifth trading day the First Five Days “Early Warning” system sounds off, but it is the whole-month gain or loss of the S&P 500 that triggers our January Barometer.

As defined in the Stock Trader’s Almanac, the Santa Claus Rally (SCR) is the propensity for the S&P 500 to rally the last five trading days of December and the first two of January an average of 1.3% since 1950. The lack of a rally can be a preliminary indicator of tough times to come. This was certainly the case in 2008 and 2000. A 4.0% decline in 2000 foreshadowed the bursting of the tech bubble and a 2.5% loss in 2008 preceded the second worst bear market in history.

The January Barometer (JB) has registered 12 major errors since 1950 for an 83.3% accuracy ratio. Including the eight flat years yields a .722 batting average. Over the years there has been much debate regarding the efficacy of our January Barometer. This debate is debunked in today’s alert to our newsletter subscriber’s.

So there is an episode in this kids show that shall not be named where there is a certain time of year where the sun is out for like 30 days, I'm talking no darkness at all. And of course the constant daylight makes it hard to sleep and so all the characters get insomnia bad, which really messes up their heads. SO I got to thinking TBB Insomnia. SO I pulled myself together even after the new episode and got working on how each member would react to each passing day. I will start with the first 5 days in this post and then go from there later on.

------------------------------------------------------------------------------

Day 1

---

Hunter: *Just drinks caf. I mean that's all a man needs right?*

---------

Tech: I hope you all are sufficiently prepared to not see me for the next 15 days.

Hunter: Ok, why?

Tech: I have calculated 15 days will be the optimum time to get the largest amount of work and research done the most efficiently before my body... How shall I put this?...crashes.

Hunter: *sips caf* Oh, ok, well have fun.

Tech: *Retreats into lab.*

-------

Wrecker: *Is just so excited about having this much sun for this long and approaches it with strong man vibes* Nothing takes me down! Especially not being tired! Right Crosshair!

Crosshair:

Wrecker: RIGHT CROSSHAIR!

-----------

Echo: *Takes the opportunity to get some reading done and work on upgrades for the ship.*

------

Crosshair: *knows everyone is going to crash eventually but assures himself that he will be the last man standing. Just sits back and prepares to watch the chaos unfold.*

---------

Omega: *Is so excited to get to stay up as late as she wants. Plans all sorts of fun activities to do with the squad and gonky.*

------------------------------------------------------------------------------

Day 2

-------

Hunter: *Just drinks caf and goes on. The first night with no sleep was brutal, but that's what caf is for right?*

---------

Tech: *Hasn't emerged from lab. Welding sounds can be heard from inside.*

-----

Wrecker: *Decides to spend the day playing with Omega. They have a blast*

---------

Echo: *Still reading and adds clean up around the ship to his bucket list.*

----

Crosshair: *Cleans his rifle. Watches Wrecker and Omega play together and declines their offer for him to join in with a scowl. Didn't get any sleep that night, but he's laid for days at a sniping post before, so he's good.*

----------

Omega: *Gets really tired in the afternoon after playing all morning, plus she didn't get any sleep last night. Tries to take a nap, but the sun is too bright.*

--------

Day 3

------

Hunter: "Caf is man's best friend, I don't care what anyone says about dogs or bunnies or familial relationships."

------

Tech: *Building noises coming from inside lab*

------

Wrecker: *Plans on bugging Crosshair for the rest of the day because Omega is too tired to play.*

--------

Echo: *Starts up on everyone's laundry, while still reading his book.*

------

Crosshair: *Gets bugged by Wrecker to the point of insanity, so he crawls up into his bunk and tries to sleep. No luck there, too much sun*

-----

Omega: *Spends the whole day sitting in the corner with a blanket over her head trying to sleep, but can't because of Wrecker and Crosshair.*

Wrecker: You look tired Crosshair!

Crosshair: I'm not tired you oaf!

Wrecker: Are you sure?

Crosshair: *deep scowl*

----------

Day 4

------

Hunter: *pouring caf* Crosshair, did you know caf is the greatest gift to mankind?

Crosshair:

Hunter: Really though, it's a beautiful thing. It makes the world a wonderful place to live in.

Crosshair:

-----------

Tech: *His lab has become his own private world*

------

Wrecker: *Finally feels a little tired. Tries to find a dark place to sleep, but the whole ship is illuminated. Ends up doing coloring pages with Omega.*

--------

Echo: *Crosses laundry off of checklist. Decides to take the mattresses out of their bunks and let them air outside. Is still reading his book*

-------

Crosshair: *Insists he doesn't need to sleep, but he really wants to. Decides he'll sleep better with his rifle so he goes to his bunk only to find his mattress has been removed. Ends up curled up in the corner with his rifle in his arms. This may be harder than he thought.*

------------

Omega: *Colors pictures for every member of the batch. But doesn't get them quite finished. Will give them to them later.*

---------

Day 5

-------

Hunter: *Has major headache from being so caffeinated but is loving every moment of it! Actually plays a board game with 'Meg and Wrecker.*

---------

Tech: *His shadow can be seen moving hurriedly back and forth in his lab. Crosshair has tried poking his head in the door to make conversation and Echo has asked if he needs anything, but Tech is ignoring them. *

-------

Wrecker: *Plays multiple board games and several rounds of holochess with Omega (he loses every time). At the end of the day he finally crashed for about 10 minutes in the pilot's seat of the Marauder.*

---------

Echo: *Put the mattresses back after letting them air all night. Or was it night? He can't really tell with the constant light. Has decided to pull the other members of the Batch in on his reading, but can't decide who to start with first. All in all he feels pretty good. After spending so long in the Techno Union's experimental tube, he figures he doesn't need to sleep.*

-------

Crosshair: *Is relieved when Echo puts the mattresses back. Decides to reorganize and clean all his gear, which was in pristine fashion anyway, but it gave him something to do. He was feeling better than yesterday and the only thing really keeping him rolling was the suspense of which batch member would really crash first.*

------------

Omega: Playing with Wrecker and Hunter made her really tired. She saw Crosshair cleaning his weapons and decided to watch, from a distance. She had been warned not to touch his things, especially right after he had cleaned them. Snuggled up with Gonky and Lula after Supper but couldn't sleep because Tech started rambling loudly in his lab.

----------

The first indicator to register a reading in January is the Santa Claus Rally created by Yale Hirsch in 1972. The seven-trading day period begins today December 27 and ends with the close of trading on January 4. Normally, the S&P 500 posts an average gain of 1.3%. The failure of stocks to rally during this time has tended to precede bear markets or times when stocks could be purchased at lower prices later in the year. As the late, great Yale Hirsch’s famous line states, “If Santa Claus should fail to call, bears may come to Broad and Wall.”

We are bullish for yearend 2021, but the market faces several obstacles for next year. Valuations are rich and year-over-year economic and corporate comparisons will be nowhere near as easy as this year versus the 2020 pandemic numbers. While the Fed has promised patience and a slow pace it is now rather clear that they will be making a concerted effort to remove quantitative easing by mid-year and begin slowly raising rates. Plus it promises to be a contentious midterm election year and the battle against Covid-19 may linger.

The results of the Santa Claus Rally along with the other two components of our “January Indicator Trifecta,” the first five days of January and the full month January Barometer (also created by Yale Hirsch in 1972) will help solidify our outlook for next year.

When all three are up the S&P 500 has been up 90% of the time, 28 of 31 years, with an average gain of 17.5%. When any of them are down the year’s results are reduced and when all three are down the S&P was down 3 of 8 years with an average loss of -3.6% with bear markets in 1969 (-11.4%), 2000 (-10.1%) and 2008 (-38.5%), flat years in 1956 (2.6%), 1978 (1.1%) and 2005 (3.0%). Down Trifecta’s were followed by gains in 1982 (14.8%) and 2016 (9.5%).

Saturday Soliloquy: October!

The first five days of October here in southeastern PA were cold and rainy. Not very pleasant, but we sorely needed the rain, so no complaints from me! But NOW? Oh, my! It was worth getting through those first five days to get what we have right now, and it’s reminding me all over again about why I love October! And I rest my case. (all images taken from Google Images)

The market decline on the last day of January spoiled what would have been the fourth consecutive January Trifecta. S&P 500 finished January down 0.2% and thus the January Barometer was negative.

Devised by Yale Hirsch in 1972, the January Barometer has registered ten major errors since 1950 for an 85.7% accuracy ratio. This indicator adheres to propensity that as the S&P 500 goes in January, so goes the year. Of the ten major errors Vietnam affected 1966 and 1968. 1982 saw the start of a major bull market in August. Two January rate cuts and 9/11 affected 2001.The market in January 2003 was held down by the anticipation of military action in Iraq. The second worst bear market since 1900 ended in March of 2009 and Federal Reserve intervention influenced 2010 and 2014. In 2016, DJIA slipped into an official Ned Davis bear market in January. Including the eight flat years yields a .743 batting average.

This year’s combination of a positive Santa Claus Rally and First Five Days with a full-month January loss has only occurred eleven times (including this year) since 1950. In the previous ten occurrences S&P 500 was down six times in February with an average loss of 1.5%. However, over the remaining 11 months of the year, S&P 500 advanced 80% of the time with an average gain of 7.4%. Full-year performance was positive 70% of the time, but with an average gain of 2.9%.

This is a summary of everything that has happened in the first 5 days of Trump’s presidency (approximately). 

- Yesterday (1-24-17), it was leaked that the EPA had received a memo ordering employees that they were not to release any information to the public (effective media black out). Today, it was leaked that the EPA was also told to begin removing or deleting any public information regarding climate change. The White House claims that this is untrue and that, instead, all scientific information is to be “vetted” by the White House before it is released to the public. You can read more information on this here. 

- In response to the media black out imposed on the EPA and all National Parks, a spate of alternative National Parks Twitter accounts have popped up, including the Bad Hombres National Park, the Alternative National Park Service, and Rogue NASA. Other National Park Twitter accounts that have gone rogue (and had tweets subsequently removed) include the Golden Gate National Park Service, Death Valley National Park Service, and the Badlands National Park. You can read more about the media black out on NPR here. You can support the National Park Service through donations and by following all of the above accounts & retweeting the information they post. 

- In response to the EPA media black out and news that the White House will be approving all scientific data collected via the EPA, the scientific community formed the Scientists’ March on Washington. You can follow them on Twitter and view their website here. When a formal march date is announced, we will post all subsequent information and sister marches here. 

- In the first 5 days of his presidency, Trump has signed executive orders to: 

Build a border wall between the United States and Mexico. This order directs agencies to begin planning and finding funding for this project. Current estimates suggest that such a wall will cost over $700 million to build, as well as millions of dollars per year to maintain in the form of 5,000 extra border patrol agents (as established in the executive order). President Trump claims that while United States taxpayers will pay for the wall at this time, the Mexican government will reimburse taxpayers after the fact. This order also demands that all agencies identify United States funds that have gone to Mexico in the last 5 years. 

Increase deportations of those convicted of any crime, anyone charged with any crime, anyone who has committed a chargeable offense, anyone who has misrepresented themselves, anyone who has abused a welfare program, anyone who is under a deportation order, or anyone who an immigration officer believes poses a thread. This order also directs the hiring of 10,000 more Immigration and Customs Enforcement agents, subject to funding. It also changes U.S. policy to allow local law enforcement officers to act as defect immigration officers whenever possible. This order also blocks grants to sanctuary cities. 

Review manufacturing regulations, with the purpose being to reduce regulations and find ways to speed up permits. 

Use only American steel or supplies in all pipelines built in the United States. 

Speed up environmental reviews for all priority infrastructure. This means that all agencies and the Chairman of the White House Council on Environmental Quality work to set up faster deadline and environmental approval for “high priority” infrastructure projects. Read more here. Essentially: the White House Council on Environmental Quality chairmen will have significant power and will decide within 30 days if a proposed project is high priority. Fun fact: the president has not yet nominated a CEQ chairman, as well as 659 other key positions. 

Speed up the approval of the Dakota Access and Keystone Oil Pipelines. Permits for the Dakota Access Pipeline will now be forced through for approval. Trump has directed the State Department to issue a final decision on the Keystone Oil Pipeline within 60 days of application resubmission. 

Institute a hiring freeze in all federal agencies Only military personnel and critical public safety positions are allowed to continue hiring. 

Withdraw the United States from all Trans-Pacific Partnership negotiations. 

Block the approval of any and all regulations currently in process. This means that any regulations signed by President Barack Obama are on hold until they are approved by either Donald Trump or his agency. 

Allow agency heads to waive requirements of the Affordable Care Act to the “maximum extent permitted by law.” 

Restore the Mexico City Policy. (We will have a post from T on this later today.)