Was January’s Rally a Bullish Sign for 2024? Dear Reader, As goes January, so goes the year.
Coined by Yale Hirsch, author of The Stock Trader’s Almanac, this is a catchy market adage that means how the market ends in January typically predicts how the market will perform for the year.
In other words, if the market ends the month on a high note, it bodes well for a strong year and vice versa. For this reason, January is seen as a barometer for the market – and for good reason.
The January Barometer, as it’s called, correctly predicted the S&P 500’s performance for the remainder of the year 75% of the time since 1945.
Another important indicator for the market, known as the “Early Warning System,” is the S&P 500’s performance for the first full week of January. Some traders claim it has a pretty good track record, too, so it’s worth examining.
The Early Warning system was in sync with the January barometer for the past couple of years... The market gained 1% during the first five days of 2023 and would climb about 24% for the year. In 2022, the S&P lost 5% during the first five days of 2022 and went on to lose about 20% on the year.
But the story this year is different. The S&P 500 actually lost 1% during the first five days of January, suggesting 2024 could be a down year. But for the full month of January, it was up 1.6%.
The question now is, will this strength continue in February and beyond?
In today’s Market 360, I’ll answer that question. We’ll take a look at what the data says, and we’ll consider two potential catalysts that could drive the market higher this year. Plus, I’ll share the stocks you want to focus on in the current market environment if you want to build a profitable portfolio. What I Really Think Is in Store for the Market Now, historically, February is a bit of a coin toss.
Dow Jones Market Data [DH1] reveals that the Dow and S&P 500 tend to rise approximately 52% of the time in February. Interestingly, in presidential election years, the S&P 500 is up 50% of the time, and the Dow is up 48% of the time in February. On average, though, both the S&P 500 and Dow post slightly negative returns in February.
So out of all this data, what should we believe?
Does this mean we should brace ourselves for a painful 2024 – or should we break out the champagne and party like it’s 1999?
First let me say that I don’t put much stock in market adages. Long-time readers know that I am no fan of the “Sell in May and go away” adage and have always told investors that we should keep both feet planted in the stock market, not step out of it. The same holds true for “As goes January, so goes the year.”
Remember, the January Barometer isn’t always right. And besides, the market has a positive return 70% of the time going back to 1926, anyway.
The reality is the strength we saw this January can be attributed, primarily, to one thing and one thing alone: earnings. Earnings Are Working I’ve been in the investing game for more than 40 years now, and I can say confidently that earnings work 70% of the time.
Considering that much of the market’s strength over the past five weeks was driven by strong quarterly results and the fact that we still have a few more weeks left in the fourth-quarter earnings season, I think stocks can continue to meander higher. We may see some stocks back and fill around mid-February in order to digest their recent gains. But overall, February could be a relatively positive month.
The reality is the fourth quarter is typically the strongest quarter of the year for companies, and the fourth-quarter earnings season commences in January. So, stocks tend to consolidate these gains in February. Considering the market’s strength in November, December and January, there is a strong possibility that stocks will consolidate at the end of this earnings season in late February.
But after that, I think it will be off to the races right up through the election. The fact is that year-over-year earnings comparisons are favorable this quarter, and they’ll remain that way for at least two more quarters this year.
Right now, tech companies, especially semiconductor names, are posting wave-after-wave of positive earnings results this quarter (you can read my earnings reviews of the Tech Titans here). And I fully expect them to remain market leaders, thanks to the artificial intelligence boom.
All in all, I fully expect the market to continue rewarding fundamentally superior stocks , just as it does during almost every earnings season. And that’s why we remain focused on these stocks in my Accelerated Profits service.
Overall, earnings continue to work. In fact, nine of my Accelerated Profits Buy List stocks reported their latest quarterly results this week. Of these nine companies, eight topped analysts’ estimates, and five rallied to new 52-week highs.
Of course, I didn’t just pick these names out of a hat… I used my Quantum Cash system to find the best stocks.
This is the system I use in Accelerated Profits, and it’s helps me pinpoint companies that are primed to post strong earnings results – sending their stocks soaring as a result.
At its core, Quantum Cash uses a series of AI algorithms to constantly scout massive amounts of data, looking for patterns. Many of these patterns are nonlinear, meaning you’re not going to be able to see them with the naked eye. But the more data you feed it, the more patterns it can spot.
To learn more about my Quantum Cash system and how I incorporate it into Accelerated Profits, click here.
(Already an Accelerated Profits member? Click here to log in to the members-only website now.)
Sincerely, |
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