The so-called “January Effect” is not what is was anymore. It is not so important as it was and more and more people are using tax-sheltered retirement plans, and that is one of the most important reasons why they tend not to sell at the end of the year for a tax loss.
Earlier, the “January effect” affected small cap stocks much more than the larger one. This trend is declining much because the investors have adjusted for it.
Definition:
A general increase in stock prices during the month of January. This rally is generally attributed to an increase in buying, which follows the drop in price that typically happens in December when investors, seeking to create tax losses to offset capital gains, prompt a sell-off.
Please note that the optimism in the market right now is historic. The charts show us that we are very close to a tipping point, but it could take some time before a major reversal occurs.
Price is always the most important and the most valuable indicator. The price in the indexes must show some reversal pattern on a daily chart, but until then, the uptrend remains intact.
January 2013 was strong, but in the last 15 years it has not been that strong. December has been a very strong month the last 15 years. How will january 2014 be? The first trading day of 2014, all the major indices was trading lower. It is the first time in six years the S&P 500 and Dow ended the first trading session of the year in red territory.
The optimism in the market tends to be very strong in the early stages of a bear market, and the charts tells us the truth. It happens again and again and again. We saw it in 2007. People poured more money into different U.S stock funds in October last year, and that is more money than any time in at least 7 years. Keep in mind that this includes the 2007 stock market top.
News today: ISM Non-Manufacturing PMI & Factory Orders at 10:00am.
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