The first five trading days of 2020 will rise! Do you know what this means for US stocks?
It is worth mentioning that according to a traditional Wall Street indicator, US stocks closed up in the first five trading days of 2020, which should lay the foundation for strong performance throughout the year.
The Stock Trader's Almanac previously studied the "first five days of the year" phenomenon dating back to 1950 and found that the performance of the US stock market on the first five trading days of each year can sometimes predict the year The market direction for the rest of the time.
According to the calculation of the "Stock Trader's Yearbook" and CNBC, when the stock market showed an upward trend in the first five trading days of the year, the S & P 500 index rose 82% of the time by the end of that year, with an average increase of 13.6 %.
Of course, despite the US stock market meeting this trigger condition, the gains in the first five trading days of the year are obviously not smooth. During this period, tensions between the United States and Iran escalated, which once frightened investors.
On January 3, the S & P 500 index showed its worst one-day trend in a month, falling 0.7%, as a surprise attack on the top Iranian generals caused oil prices to soar. However, after the initial sharp sell-off, the investment re-evaluated the geopolitical situation on Monday (January 6), which drove off concerns and closed up 0.4%.
Later, as investors waited for more information about the turmoil in the Middle East, the S & P 500 index fell 0.3% on Tuesday (January 7). On Tuesday night, Eastern time, Iran took revenge on the US air force base in Iraq, which once triggered a large-scale sell-off in the stock index futures market.
On Wednesday (January 8), US President Trump's conversation with Iran turned low-key, announcing further sanctions on the country, but no more military action. Trump also said that Iran seems to have given in.
In this regard, Ryan Detrick, senior market strategist at LPL Financial, said that there is no doubt that Iran ’s concern is the biggest concern of investors at present, and stock prices are expected to remain volatile for the time being, but historically, the impact of geopolitical events on stock markets Short-lived.
US stocks successfully completed the average closing trend of the “first five days of the year”, sending long signals to 2020. However, the ups and downs of the previous five days may also indicate that this year may be a fierce turbulent year. Wall Street analysts generally expect markets to be difficult to calm down as the presidential election and trade negotiations may still add more uncertainty.
For investors, the beginning of the year is an important time to observe the market, because it can show investors' views on the market outlook this year. The strong performance since the first five trading days of the year also bodes well for another popular seasonal indicator, the January Effect.
January is also one of Wall Street's most popular seasonal indicators, known as the "January Barometer". When the stock market rises in January, it usually means that the stock market will also rise this year, as a Wall Street proverb puts it: "What happens in January, it will happen all year."