"As January goes, so goes the year." A bullish signal is flashing green.
The Sandbox Daily (1.30.2025)
Welcome, Sandbox friends.
Today’s Daily discusses:
January Barometer flashes green
Let’s dig in.
Blake
Markets in review
EQUITIES: Russell 2000 +1.07% | S&P 500 +0.53% | Nasdaq 100 +0.45% | Dow +0.38%
FIXED INCOME: Barclays Agg Bond +0.14% | High Yield +0.19% | 2yr UST 4.213% | 10yr UST 4.521%
COMMODITIES: Brent Crude +0.68% to $77.10/barrel. Gold +2.14% to $2,829.1/oz.
BITCOIN: +1.54% to $105,146
US DOLLAR INDEX: +0.13% to 108.143
CBOE TOTAL PUT/CALL RATIO: 0.72
VIX: -4.35% to 15.84
Quote of the day
“You never know when a moment and a few sincere words can have an impact on a life.”
- Zig Ziglar
January Barometer flashing green
Technical Analysis is the study of market behavior and therefore market participants. It’s an examination of how humans behave through the simple actions of buying and selling. Price is the official arbiter of truth.
While not a technician myself, we CFAs love our CMT counterparts. Their community provides excellent analysis and view markets through an entirely different lens. Complementary skill sets improve your edge and provide a higher probability of investing success.
Friday marks the end of January and the seasonal trend known as the January Barometer.
The January Barometer is the belief held by technicians that investment performance of the S&P 500 index in January can predict its performance for the rest of the year.
“As January goes, so goes the year.”
If buyers win the battle against sellers in the month of January, the historical data shows that stocks tend to hold onto those gains. What’s more, the hit rate is off the charts.
If January is positive, the median return for the rest of the year is +13.4%, with an 86% win ratio.
If January is negative, the median return falls to +3.5%, with a 60% win ratio.
Strength in January begets more strength for the rest of the year.
Full calendar year performance is night and day different when January is positive. Reference the bottom of the table below.
The key is a positive close for the month.
Finish higher than 5881 for the S&P 500 index and it would strength the case that markets finish 2025 in the green.
Thursday’s close was 6071.
Unless we have another DeepSeek moment, things are looking pretty good for the January Barometer in 2025.
Of course, this signal firing green is not enough alone to carry the market higher. It’s just one piece of a giant puzzle.
Similar to other seasonal patterns like the “Santa Claus Rally” or the “First Five Days Indicator,” these signals provide us information about the type of market environment we’re in.
Are stocks behaving as we expect them to? Or are stocks misbehaving?
Happy hunting.
Sources: Ryan Detrick, Scott Brown
That’s all for today.
Blake
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Welcome to The Sandbox Daily, a daily curation of relevant research at the intersection of markets, economics, and lifestyle. We are committed to delivering high-quality and timely content to help investors make sense of capital markets.
Blake Millard is the Director of Investments at Sandbox Financial Partners, a Registered Investment Advisor. All opinions expressed here are solely his opinion and do not express or reflect the opinion of Sandbox Financial Partners. This Substack channel is for informational purposes only and should not be construed as investment advice. The information and opinions provided within should not be taken as specific advice on the merits of any investment decision by the reader. Investors should conduct their own due diligence regarding the prospects of any security discussed herein based on such investors’ own review of publicly available information. Clients of Sandbox Financial Partners may maintain positions in the markets, indexes, corporations, and/or securities discussed within The Sandbox Daily. Any projections, market outlooks, or estimates stated here are forward looking statements and are inherently unreliable; they are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur.
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The January barometer is a reassuring sign at a time when investors are extremely bullish, with short interest even lower than previous highs in early 2020 and late 2021. https://substack.com/@inverteum/note/c-89756685
After all, just because markets are frothy does NOT mean there's a bubble.
Good stuff Blake as always!