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January’s Fortune-Telling Prowess…Or Lack Thereof

Posted by Gabriel F. Burczyk on 1/22/10 10:30 am

Most of us have heard the sayings “as goes the week, so goes the year” and “as goes the month, so goes the year,” referring to the first week of January and the entire month of January as being excellent stock-market performance predictors for the next 51 weeks and 11 months, respectively. The phrases are commonly accepted to be as close to a ‘sure thing’ as you can get in stock market forecasting. But is it true or hype? It appears to be a bit of both, according to trading expert James Bianco.

Mr. Bianco compared the first week of January against every other week of the year…see table 1 below. What did he find? “In essence, if stocks trade up in the first week in January, the following 51 weeks should not be considered any different than any other up-week in stocks and the ensuing 51 weeks. However, a down week in stocks during the first trading week in January is a bit different than, say, a down week in the middle of June.” Fortunately, though, the S&P 500 was up the first week of 2010, so the down data do not apply this year.

Table 1

Here are the results for comparing the month of January against all other months of the year.

Table 2

As you can see, January is tied with April for being the best month for predicting gains. Nonetheless, January isn’t much better than September, November, February or May.

However, losses in January ranks #1 for predicting downward performance 11 months later than any other month, according to the lower section of table 2 above, but it’s still “no better than a coin toss,” said Bianco. In fact, it has a lower probability than predicting market direction by calling “heads” or “tails” with a coin flip…45.16% vs. 50% (coin toss).  Another takeaway from the weekly and monthly data above is you have roughly a 2 out of 3 chance the market will go up for the next 51 weeks or 12 months no matter what week or month is up or down. I like those odds!

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S&P Predicts 6.1% Rise in Dividend Payments

Posted by Gabriel F. Burczyk on 12/10/09 8:43 am

Standard & Poor’s says companies in the S&P 500 index will probably raise their dividend payments by 6.1% in 2010 after posting a 21% decline this year. Year-to-date, there were 147 dividend increases in the S&P 500 (adding $9.5 billion to payments) compared to 241 increases for all of 2008 (which added $19.1 billion). According to S&P senior index analyst Howard Silverblatt, the difficulty has not been so much the lack of increases, but the high number of decreases. He said there were 78 dividend cuts so far this year which decreased payments by $48.0 billion, and that was on top of the 62 cuts in 2008 that reduced payments by $40.6 billion. At the start of 2009, financials represented 20.5% of all dividend income in the S&P 500, down from the sector’s peak of 30%, and now accounts for just 9% of the payments. However, cuts were posted across all sector lines, with the lone exception of Consumer Staples. Year-to-date, 33 of the 34 dividend actions in Consumer Staples were positive as the sector became the leading and most consistent dividend payer in the Index, accounting for 17.4% of the payments. As for 2010, Standard & Poor’s overall view for dividends is positive. S&P says improving economic conditions will inspire companies to slowly increase their payouts.

Source: Wells Fargo Advisors

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Goldman Sachs’ Abby Cohen Predicts S&P500 at 1,100 This Year

Posted by Gabriel F. Burczyk on 8/10/09 12:22 pm

Abby Joseph Cohen, Goldman Sachs’ celebrity market strategist, during a television appearance Thursday said the S&P 500 Index may rise as high as 1,100 this year, although she warned the recovery could be choppy.

“We do think the new bull market has begun,“ Cohen told the cable channel CNBC. “It may prove that it began in March. Clearly many people were looking for better signs on the economy, and now we’re getting them.“

She said Goldman’s strategy team thinks the S&P 500 should trade in a range of 1,050 to 1,100 toward the end of this year. The S&P 500 was trading around 1,000 late Thursday. The index has bounced back strongly since the March lows and is now up more than 10% since the start of the year.

Cohen is known as one of Wall Street’s most bullish forecasters, and she gained widespread fame in the 1990s for calling the multiyear rally.

The strategist on Thursday said that although not every economic sign is positive, investors have seen improvement in key areas such as the job market and business inventories. Still, she thinks the unemployment situation will improve in an erratic fashion, she said.

“We are beginning to see improvement even in the labor market, where it appears that the job losses are slowing and there is some job creation going on,“ Cohen noted. “But let’s keep in mind that labor markets are unlikely to turn all at once or on a dime. We have many more months of difficult labor situation ahead even if the recession ... is almost over.

The Labor Department on Thursday said jobless claims dropped by 38,000 to a seasonally adjusted 550,000 in the latest week.
Cohen said her bullish outlook is based on corporate profits that are in the process of recovering. She said earnings of $75 a share for the S&P 500 next year are “reasonable” and that the S&P 500 at 1,050 would put the price-to-earnings ratio at about 14.

“We do think that’s achievable, but it doesn’t mean we get there in a straight shot,“ Cohen told CNBC.

“Even if this is the new bull market, don’t expect it to look like a ‘V.‘ Expect it to look like a series of upward steps,“ she added.

Looking ahead, she expects stocks to perform better than bonds as the economy gets back on its feet, she said. Within the stock market, Cohen said she favors cyclical sectors such as energy, technology and financials.

Source: MarketWatch.com

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S&P clears 200-day for first time in 18 months

Posted by Gabriel F. Burczyk on 6/2/09 10:46 am

The Technical Indicator, By Michael Ashbaugh, MarketWatch

The U.S. markets’ technical backdrop is now incredibly straightforward, boiled down to two main points.

First, the S&P 500 just broke sharply atop its 200-day moving average, virtually eliminating the bear case from a technical standpoint.

And second, the break higher came on the first attempt - an unusual, and distinctly bullish event—marking the S&P’s first venture above the 200-day since December 2007….....................

Read full report

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