First the Santa Claus Rally faltered, now the First Five Days indicator shows a negative trend

Seasonal indicators are always a hot topic of discussion among investors, and right now, they are flashing warning signals. Despite a strong rally led by tech stocks on Monday, the S & P 500 is down 0.1% in the first five trading days of the year, signaling a potential negative trend.

The failure of the Santa Claus Rally, which typically sees the S & P 500 rise in the seven-day period from the last five days of the old year to the first two days of the new year, combined with the negative First Five Days indicator, is causing some concern among investors. Jeff Hirsch at the Stock Trader’s Almanac notes that the First Five Days indicator has a strong track record, with 15 out of the last 18 presidential election years following its direction.

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While the January indicator (“as goes January, so goes the year”) has not finished yet, historical data in election years shows a soft record, with only 12 out of the last 18 years following January’s direction. However, it’s worth noting that there is still hope, as the Santa Claus Rally and the First Five Days indicator have failed together 9 times since 1969. Of those 9 times, the S & P 500 has only been down for the full year twice, in 2000 and 2008.

So, while the current signals may be flashing red, it’s important for investors to remain cautious but not overly pessimistic. History shows that there is still room for potential market recovery, even in the face of warning signs from seasonal indicators. Stay informed, stay alert, and stay optimistic in your investment strategies.

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