Markets are down in January. What does this mean? The SPDR Trust (NYSE:SPY)

By Nicholas Santiago on January 29th, 2010 3:33pm Eastern Time
Many traders and investors believe that the month of January is the most important month of the year. The old market adage states that "the market year will behave the same as the month of January." Therefore, if January is a down month many expect the year to be down. While this has been true for many years it is not always the case.

Let's take a look at last year for instance. The SPDR Trust (NYSE:SPY) topped out on January 6th, 2009 from it's short term bottom in November 2008. It then declined into early March before making the low for the year. As we all know the market in 2009 staged one of it's sharpest rallies in market history.

What can we expect for 2010 with January being a down month? Certainly no one person can say for sure what 2010 will bring. However, what one can say is that a zero year in a decade is certainly different from a nine year in a decade. Historically, the nineth year of a decade is one of the most bullish years of a decade. We can also say with a fair amount of certainty that the zero year (2010) of a decade is notoriously a bearish year of the decade.

Will this year be different? Perhaps, it will be. There isn't anyone that knows for sure. There are no guarantees in the markets. However, if there is one rule that I have learned over the years it is to stick with history.

Nicholas Santiago,
Chief Market Strategist

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