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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Johnny Canuck who wrote (38733)	1/6/2003 3:11:25 AM
From: Johnny Canuck	Read Replies (1) \| Respond to of 69995

January 3, 2003 The January Indicator Home Depot (HD) lowered their 2002 earnings forecast after holiday sales came in less than they had expected. Walgreen's (WAG) saw a 24.6 percent increase in quarterly profit, aided greatly by new store sales. Radio Shack (RSH) cut its fourth quarter outlook after a weak holiday season, and lower margins. There's plenty of talk near the ends of calendar years about how to gauge what the future holds in store over the next twelve coming months. And of course, we are looking for historical patterns that actually help us to accurately make these predictions. As a result, we see and hear all sorts of data on Santa Claus Rallies, wave theories, the January Effect, and many others. Some of these theories have merit, and others do not. While nobody has yet found the 'perfect' prediction model, there is one that does seem to work with a reasonable amount of consistency. The idea is simple: Whichever way January goes, so goes the entire year. Over the last 10 years, this theory has been accurate 80 percent of the time. I've charted the percentage changes for the S&P 500 in January over the last ten years, and compared that to the corresponding annual changes. The theory failed in 1994 and 2001, so this is obviously not a method with which you would bet your entire nest egg. But it is a good indication of investor sentiment. With a clean slate (a new year) and the previous year behind us, many investors begin taking positions within the first few trading days of the year. It is this trading, barring any substantial economic or political changes, that lets you know whether the public is thinking like a net seller, or a net buyer. Perhaps the January indication is coincidental, or perhaps it's a sign of simple momentum. Maybe it's even something of a self-fulfilling prophecy, where investors see a certain beginning, and that sets the tone for the entire year. In any case, keep an eye on what happens in January, and you may find that investors have tipped their hand for the coming year. Support & Resistance Levels: SUPPORT RESISTANCE Nasdaq Composite 1365 1405 S&P 500 895 925 Dow Industrials 8500 8700 ABOUT PRICE HEADLEY Price Headley is the founder and chief analyst of BigTrends.com, which provides daily stock and options recommendations and education. Timer Digest recognized Price and BigTrends.com among the Top 10 stock market timers for 2000. Price has been widely quoted by Barron's, CNBC, The Wall Street Journal and USA Today. Price is also the author of the new book, Big Trends in Trading: Strategies to Master Major Market Moves. If you want Price to answer any of your questions on future web site updates, send an email to askprice@bigtrends.com or call 1-800-BIGTRENDS (1-800-244-8736). DISCLAIMER: THIS COLUMN IS AN INFORMATIONAL AND EDUCATIONAL SERVICE ONLY. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. BigTrends.com, Price Headley and Hard Right Edge shall not be liable for any damages or costs of any type arising out of or in any way connected with the services of the company. hardrightedge.com