Feb

1

The first blow is half the battle. There is so much drift in stock prices that it's hard to do a good seasonal study, especially since there are numerous possible comparisons and only a small number of years to reep profit. With the best of intentions, I decided to do a proper seasonality study on a going forward basis using prospective information only, which is the only way to do a seasonal study and develop some confidence in it. I decided to handle January in a similar fashion in honor of the mumbo about neural et al since I saw that similarities gave the same results as neural in all cases, but are duplicatable and understandable. This year, January was up 1.4 %. I figured I'd take all the years that had a January of within a 1.5 % range of that and look at the moves in the next three Feb. and the next three January months end to year end. Then I would compute a running total and use that running total to predict the next occurrence. But the best laid plans often go astray. There were only six Januaries with a chance of anything around 1.5% since 1959. The problem is that January is a wild month with many 5 to 10% moves and more. These six Januaries were as follows, with moves the next month and the next 11 appended.

Year Jan. Move Feb. Move Jan. End - Year End
1968 0.5 -1.8 -11.5
1972 1.8 2.5 13.8
1986 0.2 7.1 7.5
1993 0.7 1.0 6.1
1998 1.0 7.0 26.0
2004 1.7 1.2 7.2
Avg.   2.8 4.3

 

No prospective tests are possible because of the paucity. However, the 2.8 % move in Feb. looks about 5 in 100 by chance, which the artful simulator will vet. tomorrow morning.

Steve Wisdom writes:

Previously, Vic wrote that there were only six Januaries with a change of anything around 1.5% since 1959. The problem is that January is a wild month with many 5% to 10% moves and more. Below displays a stem & leaf of January % changes in SPX, since 1959. As suggested by Chair, there are several moves >10%.

-7 | 72
-6 | 92
-5 | 10
-4 | 64
-3 | 8
-2 | 750
-1 | 8760
-0 | 98
0 | 2457
1 | 0478
2 | 457
3 | 33335
4 | 000129
5 | 8
6 | 13
7 | 148
8 |
9 |
10 |
11 | 8
12 | 3
13 | 2

Alston Mabry adds:

“The problem is that January is a wild month with many 5% to 10% moves and more.”

If you look at each January move (S&P cash, 1959-2007) as a z-score using the mean and sd of the previous 12 months, and then create a histogram with steps of .25, you get a distribution with a somewhat different "balance":

z / frequency
-3.39 1
-3.14 0
-2.89 0
-2.64 0
-2.39 1
-2.14 1
-1.89 1
-1.64 3
-1.39 3
-1.14 2
-0.89 0
-0.64 2
-0.39 2
-0.14 2
+0.11 4
+0.36 5
+0.61 4
+0.86 3
+1.11 4
+1.36 1
+1.61 2
+1.86 4
+2.11 1
+2.36 2
+2.61 0
+2.86 1

 


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