The new year's stock market indicators are favoring the bears. The First Five Days of January indicator shows we could be in for disappointing returns in 2024.
With the major indexes posting losses to start the new year, this year's First Five Days indicator was negative.
Historical data shows that if the first five trading days of the new year are positive, the S&P 500 has an average annual return of 14.2%, with 83.3% of years producing gains, according to Adam Turnquist, chief technical strategist for LPL Financial. The indicator uses data dating back to 1950.
But if the S&P 500 is lower in the first five days, average annual returns drop to a measly 0.3%, and the percentage of positive years falls to 53.8%.
Stock Market: First Five Days Are Critical
Stocks started the year with a pullback after nine straight weeks of gains. The Dow Jones Industrial Average shed 0.02% in the first five sessions. The S&P 500 was down 0.13% while the Nasdaq composite slid 1.12%. The small-cap Russell 2000 performed worse, falling 1.88%.
The First Five Days stock market indicator was discovered by Yale Hirsch, the creator of the Stock Trader's Almanac and newsletter.
This year's bearish five-day indicator followed a bearish Santa Claus Rally indicator. That signal covers the final five days of the year and the first two in the new year, according to the Stock Trader's Almanac. When the stock market falls in that window, there's often a bear market or significant decline.
But wait. There's one more stock market indicator left this month.
The January Barometer, developed in 1972 by Hirsch, says that if the S&P 500 closes the month higher, the year will end with gains. The January Barometer boasts an 83.6% accuracy rate since 1950 and had only 12 major errors since 1950.
Of course there are no crystal balls, but the indicators are based on historical data. Let's see what happens on Jan. 31 and how the year plays out.
Follow Kimberley Koenig for more stock market news on X/Twitter @IBD_KKoenig.
