January’s are perceived as among the most favorable months of the year. Instead, it may turn out to be classic trader cognitive dissonance at work. The past decade does not bear out this optimism in Nasdaq. In fact, in 8 of the past 9 January’s, the composite has a marked propensity to have a huge opening day or day 2 of the month, rally for a week, then tumble about –10% into February.
The exception was 2008 when the market didn’t even attempt a rally and tumbled –18% from day 1 into the 3rd week. So its not all roses despite investor ebullience entering each January for the past decade. Maybe Ben’s steriod induced market can break the streak that January will contain a significant correction at some point by the 2nd half of the month, but so far 9/9 is what he’s up against.
NASDAQ COMP JAN 2002 –AGAIN HUGE 1ST DAY; PEAK 4 DAYS LATER, THEN TUMBLE
NASDAQ COMP JAN 2003 –YET AGAIN HUGE 1ST DAY; PEAK 7 DAYS LATER, THEN TUMBLE
NASDAQ COMP JAN 2004 –HUGE 2ND DAY; PEAK 14 DAYS LATER, THEN TUMBLE
NASDAQ COMP JAN 2005 –THIS TIME PEAK 1ST DAY; THEN TUMBLE
NASDAQ COMP JAN 2006 –YET AGAIN HUGE 1ST DAY; PEAK 6 DAYS LATER, THEN TUMBLE
NASDAQ COMP JAN 2007 –HUGE 2ND DAY; PEAK 7 DAYS LATER, THEN TUMBLE
NASDAQ COMP JAN 2008 – TUMBLED -18% FROM GET GO
JAN 2009 –YET AGAIN HUGE 1ST DAY; PEAK 2 DAYS LATER, THEN TUMBLE
Eden Rahim
