Ian Woodward's Investing Blog

Archive for January, 2015

Stock Market: Rounded Top Action for the Festive Season

Saturday, January 10th, 2015

After a long Rally for Thanksgiving, the Stock Market has been a nightmare to trade in, up down and round about!

Picture Rounded

…And to prove it, here is the action of the Major Market Indexes over the last 20 Days:

Picture Indexes

Likewise, the Canaries have been trotting around doing nothing spectacular:

Picture Canaries

The S&P 1500 %B shot up with the Thanksgiving period and then has wobbled around with a weak Rally:

Picture S&P1500

This next chart demonstrates the various phases we have suffered after the strong period prior to Thanksgiving:

Picture Pat

The Twelve Drummers Drumming chart shows the periods of up, down and sideways very well, and we see recent turmoil:

Picture Drummers

This chart shows clearly the Stalemate we are in with %A+B below %D+E stocks under Accumulation/Distribution:

Picture abcde

As I have taught you in previous recent charts, the biggest clue as to when the Market has completed correction is when the % of Stocks in Bucket 0.2 to 0.3 is >17.5%.  We are currently at ~11.0% so we are not there yet and we need to be patient…hence, the market can go in either direction starting next week:

Picture Percent B

…And, as you would expect, when we examine a higher Range of %B, such as Buckets >0.6 and <0.8, the Rally is very weak:

Picture Percent B2

Net-Net, the January Effect was delayed and essentially fizzled, so we shall see if the Small Cap stocks pick up from here.  Be patient and remember the stake in the ground at this point in time between the Bulls vs. Bears is Stalemate:

Happy New Year!


Stock Market: January Effect and Types of Investors

Thursday, January 1st, 2015


A long term follower and supporter of my work wrote me a note about the January Effect and here is my response which I felt I should share with you all to explain our different definitions, especially to help new readers:

Ian – always appreciated. However, please straighten me out.

Effect Picture

I have worked on the definition of January Effect of small cap buying years ago starting in first to middle of December and then buying started running earlier into November and even October. If you look at the 3 month chart the Russ 2k outperformed the other 3 main indexes and the same if you go from 1 December. Here is the link to the 3 mo chart (+ 11%) and can easily be read for 1 month with the same comparison.

I have never subscribed to Santa (folks said he didn’t exist when I was a kid) as some of my best gains have been after 12/25. However, the market then usually sells the January effect the first week (sometimes the first trading day but more like end of the first week) and then January is positive by the end of the month.  Tell me where I have been going wrong all these years?

Thanks,  Bruce

Thank you Bruce and for your contributions to this bb over time.  We go back almost 25 years, and you have always been the “guru” of small cap stock investing, so your insights are always valuable, and you are not wrong over these many years…only different. 
As you well know in my book, our audience consists of 4 Types of Investor.  Types 1&2 are essentially short term Traders, while Types 3&4 are longer term Investors.  The majority of our clientele are Type 3 who look for opportunities over a few weeks to a few months.  I’m assuming your bias is towards Type 4 and therefore longer than most.  So your comments are very well put.
As time has passed us by since 20 years ago with the progress of the Internet in real time and High Frequency Traders (HFTs), they have also seen that until there is a Clean Out ala March 2003 and 2009 when a Fresh Rally truly begins, many have also realized that they must dabble as Type 2 shorter term traders if they are to engage the market 
My comments around the festive season are always with this in mind and I use the standard definition of the first week in the New Year as the January Effect.  It’s aimed at trying to accommodate the Types 1 and 2’s at such times.  My Blog Notes over the years reflect that.
Here then in a nutshell is what I have suggested with my recent Blog Notes.  Some 35 new supporters from Vietnam have found some nuggets in the last couple of posts, and I wish you all a Happy New Year with the following gift to you all:
Effect Pat
Best Regards, and Happy New Year to you all.

Copyright © 2007-2010 Ian Woodward
Disclaimer: Commentaries on this Blog are not to be construed as recommendations to buy or sell the market and/or specific securites. The consumer of the information is responsible for their own investment decisions.