Ian Woodward's Investing Blog

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

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

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

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

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

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

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

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:

…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:

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!

Ian.

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.

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