Dow - A look at the monthly chart

Yesterday I posted the monthly chart of the FTSE100 and the bullishness of the move up since the new year began was clear to see. Today, I post the Dow monthly chart which again shows a strong bullish case. The FTSE tends to follow the Dow, so no one should be surprised that the latter is also getting a little ahead of itself. Yesterday there was some pretty poor news concerning consumer confidence, perhaps as a result of fiscal cliff jitters in December, the market shrugged it off. The Dow has a look about it that it wants to go higher, especially as 14000, a nice round number is within reach, it would be a surprise if it didn't go past it soon regardless of news. 

However, there is a risk of complacency setting in after this start to the year which could easily pull those who have been sitting on the sidelines in just when the smart money begins to sell out. A pullback has to come, just a question of when and by how much.

Dow Monthly

January, historically an important month for the markets.

January is usually an important month for markets as it is often the case that as January goes so does the rest of the year. 

Data below is for the US markets.

Market Watch reports:

Since the late 1800s, when the Dow Jones Industrial Average was created, it has gained ground in 63% of the Januarys. The comparable proportion for all other months of the calendar. in contrast, is 57%.

Largely on the strength of these increased odds, the average January gain for the Dow since the late 1800s has been 0.9%, in contrast to 0.6% for all non-January months.

It goes on.

Since the late 1800s, an “up” January has been followed by an “up” rest of the year 67% of the time. The comparable percentage for a “down” January, in contrast, is 55%. The difference in average 11-month returns is 8.3% (follow an “up” January) vs. 4.2% (following a “down” January).

http://www.marketwatch.com/story/how-special-is-january-2013-01-02?link=MW_story_insert

If January is a very good month then the rest of the year often follows suit.

Since 1970, there has been 13 times when the US market has been above 3.75% in January. Every time the index completed the year with a substantial gain.

The 13 Januarys with returns of 3.75% or greater were in 1971, 72, 75, 76, 79, 83, 85, 87, 88, 89, 91, 97 and 99.

The average gain for the rest of the year was a surprising 19.6%.

http://www.marketoracle.co.uk/Article32875.html

While there is a need to be weary of such stats in that there is no guarantee that history will always repeat, it is worth noting as part of an investment/trading strategy that some months do tend to see better performance than others and as with behaviour in general, the markets often repeat what they have done before. It will be interesting to see how long and how much of a positive Fiscal Cliff sentiment carries on into the new year.

Dow touches the 200 dma

Although the US markets are currently closed due to Hurricane Sandy, futures are suggesting that the Dow is now sitting on its 200 dma.  In the past it has bounced from here, but the last time back in July/August the 20/50 dma had just gone positive whereas now it is in a crossover to the negative side. There is more negative in the current Dow daily chart than positive, but it will be interesting to see if and when any rally comes how strong it will be. The Presidential election may have something to say about that.

Dow