January Barometer 2010

The end of January is upon us so that can only mean one thing...what is the January Barometer telling us?

The January Barometer is an indicator of sorts that can give a hint of how the market will perform depending on the January market action. It goes something like this...

If the Dow Jones Industrial Average finishes the month of January with a gain, the market will post a gain by year end 91% of the time. If the month of January is not so kind and the Dow posts a loss by month end, the market will tend to be bearish and post a loss 61% of the time.

Of course the barometer was slapped upside the head in 2009. Last year the market posted a loss for the month of January and then the market rallied in March and continued all year. Of course the barometer also stated that the inverse is true...39% of the time the market will finish higher even with a drop in January. And it did.

This year, the DJIA started at 10,428 and finished at 10,067. So once again the barometer is leaning toward a "down' year.

So why do I believe that the market will finish lower this year? When the market finishes down in January it is basically a flip of a coin as to whether the market will follow this trend over the next eleven months. Last year it didn't. Since the barometer is saying the same for this year, I'll stick with the rules of statistics, ignoring the law of large numbers, and expect an even number of heads and tails....market up last year, market down this year. This make monkey happy!

Speaking of large numbers, the QID trade gains are updated in the left side"bear".