Rooting For A Choppy January

So far, the start of this year has been pretty dull for the bulls. We’ve seen no (sizable) sell-off, so there’s been no juicy “buying the dip” opportunity, and there’s been no ‘start of the year’ rally. What we’ve seen is chop (and the working off of overbought conditions). And guess what, that might be OK for the long-term health of the stock market.

You might have heard about the January indicator. Basically, “As Goes January, so Goes the Year“. The 1st month (and even 1st week and 1st day!) of performance is a solid historical indicator for the rest of the year. We’ll my hypothesis has been that 2014 will be a choppy year with small positive EOY returns. And so far, the action in January confirms that. Now there’s still 7 trading days left (as of my writing), but given the action we’ve seen so far, I wouldn’t be too confident in predicting a rally or sell-off so expect some more choppy action.

So why would choppy action in January and thus 2014 be OK for the long-term health of the stock market? Well, because as I mentioned in my 2013 Chart Of The Year post, we want to see some consolidation after a monster run in 2013 (and frankly, 2012 was a good year as well). This could set us up for a major run in the future years.

$SPY – SPDR S&P 500 Daily Chart

SPY daily

 

Tags: $SPY $SPX $DJIA $SSO $SDS 

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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