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Pastimes : The Naked Truth - Big Kahuna a Myth -- Ignore unavailable to you. Want to Upgrade?

To: Ken98 who wrote (81123)	12/26/1999 7:35:00 AM
From: re3	Read Replies (2) \| Respond to of 86076

from the toronto star, dec 26/99: Investors hoping for a Santa Claus rally ``If Santa Claus should fail to call, bears will come to Broad & Wall.' - The 1983 Stock Trader's Almanac, The 2000 Stock Trader's Almanac The Stock Trader's Almanac, an annual publication of the Hurst Organization of River Vale, N.J., is a stock-market organizer that alerts readers to seasonal opportunities and dangers. The Almanac also provides a historical viewpoint by making pertinent statistics available on past market performance. According to the almanac, the Santa Claus Rally often brings Wall Street a short, respectable rally. It occurs within the last five days of the year and spills into the first two days of January. The 1983 edition says that in the 30 years spanning 1952 to 1981, the average seven-day gain was 1.96 per cent. The 2000 edition says that in the 41 years spanning 1952 to 1998, the average seven-day return slipped to 1.7 per cent. The current almanac also says that whenever Santa fails to appear, it usually precedes a bear market or indicates that stocks could be purchased at lower prices later in the year. Only in the years of 1966, 1984, 1992 and 1994 was there a false signal (excluding 1990, because Saddam Hussein cancelled Christmas by invading Kuwait in August). I assume the Santa Claus Rally will appear again this year, but we face another little worry. ``As January goes, so goes the rest of the year.' - The Stock Traders Almanac. The almanac calls this indicator the January Barometer. Some business publications incorrectly call it the January Effect. By either name, it's a study of small stocks versus the big-stock Standard & Poor's 500 during January. According to the 1983 almanac, the January Barometer failed in its job of prediction only twice in 32 years from 1950 to 1982. That's an outstanding 87 per cent batting average. According to the 2000 edition, the barometer is still a reliable indicator. In 20 years from 1980 to 1999, the barometer made only six errors, for a batting average 70 per cent. The most notable errors were the failure to call the bear markets of 1987 and 1994. In each case the stock market advanced in January and stumbled in February because of a hike in interest rates. Note that our current stock-market conditions are similar to those of 1987. All eyes will be on the U.S. Federal Reserve when it meets again in February to decide the court of interest rates. Another market condition could also lead to problems in February. In October I suggested that a low in the month could be a low-risk entry point for investors to enjoy a youthful second up-leg advance in stock prices. That began on Oct. 22, and the up-leg is currently 10 weeks old. By the start of February, the up-leg would be a high-risk 16 weeks old. Low-risk periods such as last October are usually accompanied by fear and pessimism; high-risk periods such as now are filled with greed and optimism. The current optimism for technology stocks is typical of a mature up-leg. It may be prudent for investors to use a possible Santa Claus Rally to reduce equity exposure. More aggressive investors could hold on through mid-January, 2000, before selling to avoid the risk of a February interest-rate hike in the United States. If we do not get a Santa Claus rally this year, I would not commit new money to this market in the hope of a positive January Barometer. Set your stop losses and protect yourself.