JTH

There is a stark difference between the End of Year performance of an up vs. down January. However, I should also point out... stats that are acceptable in the trading community probably wouldn't hold up under scientific scrutiny, especially when there are only 64 points of data to speculate from.

So goes January, so goes the year (or at least that's what they say.) From 1950-2014, we'll contrast an up/down January against its End of Year gains

• Collectively, we show the last 64 years have a 73% winning ratio with 8.86% average yearly returns
  
• However, for the 39 years when January closed up, we have a 90% winning ratio with average 16.71% yearly returns
• Conversely, for the 25 years when January closed down, we have a 48% winning ratio with -3.39% average yearly returns
  

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Digging down further, we'll contrast February against an up/down January from 1950-2014

• We show the last 64 Februaries have an average 55% winning ratio and -.05% average returns
  
• However, for the 39 years when January closed up, February has a 64% winning ratio with .65% average returns
• Conversely, for the 25 years when January closed down, February has a 40% winning ratio with -1.14% average returns
• This data tells us that in the past, when January closes down, the odds are stronger that February will close down
  

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Now for the shorter 20-year trend, contrasting the month of February against the other months of the year, from 1995-2014

• We show a 60% winning ratio, which is below average, ranking in a 5-way tie for 6th
  
• We show -.21% average gains, which is below average, ranking in a 5-way tie for 6th
  
• We show 2.55% average positive gains, which is below average, ranking 11th
  
• We show -4.36% average negative gains, which is below average, ranking 10th
  
• In the shorter 20-year trend, February is a poor performer
  

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For week 5, we'll contrast against the 52 weeks of the year, from 1995-2014

• We show a 55% winning ratio, which is below average, ranking in a 9-way tie for 26th
  
• We show -.16% average gains, which is below average, ranking 38th
  
• We show 1.52% average positive gains, which is below average, ranking 31st
  
• We show -2.21% average negative gains, which is below average, ranking 39th
  
• In the shorter 20-year trend, week 5 is a poor performer

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Rolling into the first 11 trading days of the month

• The average 11-day winning ratio is 59%
  
• The cumulative 11-day average gain is .88%
  

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Looking at the last 11 Monday through Fridays, there's no other way to say it… it's ugly


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I wanted to set aside some time to take a look at some key levels and identify the risk/rewards for those levels. In my analysis, I don't like to get bullish or bearish, because I find that if I commit too much to one side, then it's more difficult to switch back over.

Looking at the upside, a test of 2064 is 3.8%. From there we have the 2090 area with no historical overhead resistance to hold us back. Once a fresh set of 52-week highs are created, then the only resistance levels we have, may largely be psychological, where we might gravitate towards numbers that look good based on what we've experienced in the past. From this perspective, I'll speculate those levels will be 3000, 3100, 3131, 3200, 3210, 3232, 3300, 3333, 3400, 3434, 3456 ect…

Looking at the downside, if 1988 breaks

• A test of 1972 is -.80% this is the Dec low, a breach of this level has historical significance and may send traders running for the exits
  
• A gap fill at 1905 is -4.2%
  
• A test of the 2014 Feb-Oct trendline is -6.7%
  
• A test of the 2014 Oct lows is -8.4%
  

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Lastly, let's look at the number of S&P 500 stocks trading above their 50/150/200 day moving average

• On the first chart, with the 50-day, anything below 33% is usually a good area to buy because its where we often exhaust the sellers in a bull market
  
• The same thing holds true for the 150/200 day at the 66% level (under bullish conditions)
  
• It is concerning that all three Bollinger bands are sloping down
  
• All 3 charts are producing lower highs and even lows, in the charting world, this is the classic setup for a descending triangle, hinting we will breakdown
  

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Wrapping this up, as we head into February,there isn't much bullish data to work with. I myself have had some personal experiences with underperforming during this month, but in the end it doesn't matter what month it is, it matters how we trade it.

So let's end this on a good note

• Over the last 3 years where January closed down, the End of Year gains were 11.39% _ 12.78% & 23.45%
  
• Over the last 2 years where January closed down, February gained 4.31% and 2.85%
  
• Over the last 4 years, week 5 closed up, gaining .81% _ .31% _ 2.17% & 2.71%
  

Trade hard…Jason