Technical Market Report For Saturday, Jan. 2

The chart below is similar to the one above, except it shows the average daily performance over all years for the SPX in January in red, and the performance during the first year of the Presidential Cycle in green.

Since 1979, the Russell 2000 (R2K) has been up 55% of the time in January with an average gain of 1.5%. During the first year of the Presidential Cycle, the R2K has been up 70% of the time with an average gain of 1.8%. The best January ever for the R2K was 1985 (+13.1%), and the worst was 2009 (-11.2%).

The chart below is similar to those above, except it shows the daily performance over all years of the R2K in January in magenta, and the performance during the first year of the Presidential Cycle in green.

Since 1885, the Dow Jones Industrial Average (DJIA) has been up 63% of the time in January with an average gain of 0.9%. During the first year of the Presidential Cycle, the DJIA has been up 67% of the time in January with an average gain of 0.7%. The best January ever for the DJIA was 1976 (+14.4%), and the worst was 2009 (-8.8%).

The chart below is similar to those above, except it shows the daily performance over all years of the DJIA in January in grey, and the performance during the first year of the Presidential Cycle in green.

Conclusion

The market has been following its seasonal pattern pretty closely, and the seasonality for next week is strong. The strongest sectors last week were finance and utilities (up from the bottom last week), while the weakest were biotech and energy. I expect the major averages to be higher on Friday, January 8 than they were on Thursday, December 31. 

Last week, the R2K was down slightly while everything else was up; so I am calling last week's positive forecast a tie. 2016 was the most recent fourth year of the Presidential Cycle before 2019. My forecasting record for 2016 was negative (more losses than wins).

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