The Dines
Letter's
Seasonalities: January
By James Dines, editor
The Dines Letter
1) In the 41 Januarys since 1961, the Dow-Jones
Industrial Average (DJI) has risen 27 times and declined 14 times,
bullish nearly two-thirds of the time.
2) Action of the first trading week of January
and the month as a whole both appear to have some predictive
value for the overall market. Calling January's first 5 days
an "Early Warning System," the Stock Trader's Almanac
finds that 28 out of 32 rising weeks in Januarys for the
S&P 500 since 1950 had matching year-end gains for an impressive
88% accuracy. On top of that, 3 out of the 4 exceptions (1966
& 1970-Vietnam War and 1990-Gulf War) were extraordinary
bearish circumstances. The reverse of this warning system however,
as when the S&P 500 were downers, did not work.
When applied to the DJI, from 1961 to 2000, our
Research Department learned that 29 rising weeks led to 21 up
years, for a 72% accuracy rate less impressive than the S&P
500 but nonetheless significant. The down weeks, as with the
S&P 500, were meaninglessly divided between up and down years.
3) Popularly known as the "January Barometer,"
the month of January has gained prominence as one of the foremost
market bellwethers. Briefly, whatever happens to markets in January
projects the direction the year will take. On the S&P 500,
it boasts a perfect record of having predicted the year in odd-numbered
years from 1939 to 1999. As for the exceptions, since 1951,
there were only 9 Januarys that did not have matching end-of-year
results and, interestingly, 7 of those 9 mismatched years had
down Januarys, underscoring the barometer's apparent weakness.
Nevertheless, its accuracy rate on the S&P 500 stands at
82% (42 out of 51 years).
Turning to the DJI, we again found a comparable
83% accuracy 33 correct predictions out of 40 years. The only
difference noted was that even the down Januarys in the DJI foreshadowed
down years at the rate of 8 out of 11 times. Moreover, the up
Januarys in the DJI were just as accurate as with the S&P
500, at 86% accuracy, with 29 up Januarys followed by 25 up years.
In conclusion, an up January is extremely bullish
for the market, especially if the first 5 trading days are up
and if it is an odd year. If both the DJI and the S&P 500
are down in January, the DJI is more likely to end lower for
all of the 2002.
4) As for the Dines Gold Stock Average (DIGSA),
the 34 Januarys since 1968 include 21 rises, 12 declines, and
one neutral, for a bullish record of almost 7 to 4 that confirms
the validity of the Dines Rule of Gold Seasonality (DIRGS), Dinesism
#9.
Interestingly, the Dines Silver Stock Average's
(DISSA) down Januarys show a stunning accuracy ratio in terms
of having predicted silver's direction for the rest of the year.
Specifically, of the 10 Januarys in which DISSA was a downer,
no fewer than 8 of them resulted in a down year for DISSA. Unfortunately,
the rising Januarys for DISSA only worked 48% of the time, with
11 up years out of the 23 Januarys not statistically helpful.
In conclusion, January is usually a bullish month
for gold and silver shares, but if DISSA declines in January
that would be a serious negative factor for silver-mining shares
for all of 2002. The end of tax-motivated selling should lift
golds and silvers in early 2002 as per DIRGS, Dinesism #9. As
always, note that there are no stock-market guarantees, only
the percentages used in our "educated guesses."
Editor's Note: James
Dines is editor of The Dines Letter, P.O. Box 22, Belvedere,
CA 94920, 1 year, 17 issues, $195.
