01 January 2011

Seasonal Effect : January

With new year comes new hopes and resolutions! How much does this impact stock markets? January since 1991 has been a 50-50 kind of month. But recently it has started to become a roadblock for bulls. If you see the chart below, out of 20 years 10 has been positive and 10 negative, but the average return has dwindled in the last decade. Has this become a norm now of buying in December and selling in January?

We are already stretched in terms of oscillator conditions technically due to non stop December creep up. I would expect some correction during the mid-month period. How things look after that will decide whether January can break the 3 year streak of under performance.

Now coming to the daily seasonality in January, as you see initial few days are mostly positive for markets! New year hopes and festive spirits looks to be still in force, but mid-month period puts a pause to those. Overall I think January is/should be an exciting month, when people are back to work and some pending decisions are taken!


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