Okay, I really screwed this one up. Anyone ever tried working out some code with a 4 and 9 year old wrestling on the couch and your wife talking to you about something pretty on Etsy? I don’t recommend it. The good news is that the code is now absolutely correct. I deleted some comments that were made about the first post as they will not make sense now. Apologies to my readers…
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After reading my January Seasonality post, a reader wondered if the market follows January’s results.
The short answer is yes, it appears there is a relationship.
Some more statistics, generated from 1960 to 2010…No commissions or slippage were included in the tests.
January returns were calculated by assuming one bought the close of the last trading day of December and sold on the last trading day of January.
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Buy $SPX on the last close of January if the month closed negative. Sell at the close of the last trading day of the year.
21 trades
Average Trade = 0.43%
% of Winners = 57.14%
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Buy $SPX on the last close of January if the month closed positive. Sell at the close of the last trading day of the year.
30 trades
Average Trade = 10.46%
% of Winners = 86.67%
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It appears that there may be an edge to following January’s returns.
As a bonus for those who came back a second time for the corrected and updated post, I’m posting an equity curve generated from buying only if January closed positive:
The system is long when the graph is blue and in cash when it is green. Drawdowns are shown in red.
Buying only when January closes positive has generated a compound annual growth rate of 5.7%
It’s the first week of Jan, not month.
Not in this test. The reader asked specifically about the month of January.
fucking brilliant. i love it.
first week, first month, whatever…i love how you pop this shit out with the flick of a few buttons.
would you be so kind as to run this idea on the first week of jan? the next group of junkies will undoubtedly say “first three days” or “first four days,” but first week should certainly be close enough.
love your work, sir.
Thanks Robert. I don’t think it will be any problem to run that idea. To be clear, you want to buy the 2nd week of January and hold for the rest of the year if the 1st week is positive?
I believe that is how the myth goes, but I would also wonder what happens to the rest of the year if the first week is negative. I don’t know how difficult it would be to run this same test with the first column being week one and the second column being weeks 2-52. Thanks for this. This was actually something I was going to look up but I think you can run it so much easier. 😉
Thewife, I’ll run that test soon. It should not be a problem.
Could you run the last ten minutes of the second Tuesday of January, on Leap Years when Easter falls in the second half of April?
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Ah well it was worth a try. Even though both Jan ’09 and ’10 were down months, stocks closed the year positive.
Here is some good reading regarding January
“January has not impressed over the last decade.”
http://marketsci.wordpress.com/2010/12/27/january-bullishness-on-the-wane/
BUT
“When the Dow Jones Industrial closed out the year with strong gains on the last quarter, the last 6 month and the year as well, this had positive implications for the index’ performance in January of the next year as well. ”
http://www.tradingtheodds.com/2010/12/dow-jones-industrial-year-end-and-1st-quarter/
In my opinion we need to dip. this shit is getting crazy. even if its quick and we rebound to close up in January
Looking forward to the 1st week results
Wood can you post the code so I can practice my amibroker skills?
Thanks
Luke, I’m going to work a little bit more with the code and then I’ll post it.
Bloomberg must look at this site, one day later, (today, just now as a matter of fact) they are doing a report on this exact screen you have here….
funny.
@Mr. Limm – the whole point was supposed to be the first week of January to begin with. Who the hell are you?? And actually…who cares?!