February Almanac: Not Great After Down January
By: Jeffrey A. Hirsch & Christopher Mistal
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January 27, 2015
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February is up only slightly more than half the time since 1950, and depending on the index, up or down marginally on average. However, small cap stocks, benefiting from “January Effect” carry over; tend to outpace large cap stocks in February. The Russell 2000 index of small cap stocks turns in an average gain of 1.1% in February since 1979—just the seventh best month for that benchmark. 

In pre-election years, February’s performance generally improves with average returns all turning positive. NASDAQ performs best, gaining an average 2.4% in pre-election-year Februarys since 1971. Russell 2000 is second best, averaging gains of 2.1% since 1979. DJIA, S&P 500 and Russell 1000, the large-cap indices, tend to lag with average advances of around 1.0%.

However, February does not have a solid track record when full-month January was negative. Going back to 1950, DJIA has declined 23 times in January, S&P 500 25 times and NASDAQ (since 1971) 15 times. Regardless of index, the following February was down more often than up and the average performance was solidly negative.

[Down Januarys & February's Performance Table]

The first trading day is bullish and DJIA, S&P 500 and NASDAQ have traded higher in 10 of the past 12 years. Average gains on the first day over this 12-year period are right around 0.5%. Strength then tends to fade after that until the stronger eighth, ninth and eleventh trading days. Expiration week has a spotty longer-term record, but the week after has a clear negative bias with averages losses across the board over the past 25 years.

Presidents’ Day is the lone holiday that exhibits weakness the day before and after (Stock Trader’s Almanac 2015, page 88). The Friday before this mid-winter three-day break is exceptionally treacherous and average declines persist for three trading days after the holiday going back to 1980.

February (1950-2014)
  DJI SP500 NASDAQ Russell 1K Russell 2K
Rank   8   11   9   11   7
# Up   38   36   34   22   21
# Down   27   29   20   14   15
Average %   0.1   -0.03   0.6   0.2   1.1
4-Year Presidential Election Cycle Performance by %
Post-Election   -1.6   -1.8   -3.9   -1.9   -2.0
Mid-Term   1.0   0.7   1.0   1.3   1.9
Pre-Election   1.0   0.8   2.4   1.1   2.1
Election   -0.1   0.1   2.8   0.3   2.5
Best & Worst February by %
Best 1986 8.8 1986 7.1 2000 19.2 1986 7.2 2000 16.4
Worst 2009 -11.7 2009 -11.0 2001 -22.4 2009 -10.7 2009 -12.3
February Weeks by %
Best 2/1/08 4.4 2/6/09 5.2 2/4/00 9.2 2/6/09 5.3 2/1/91 6.6
Worst 2/20/09 -6.2 2/20/09 -6.9 2/9/01 -7.1 2/20/09 -6.9 2/20/09 -8.3
February Days by %
Best 2/24/09 3.3 2/24/09 4.0 2/11/99 4.2 2/24/09 4.1 2/24/09 4.5
Worst 2/10/09 -4.6 2/10/09 -4.9 2/16/01 -5.0 2/10/09 -4.8 2/10/09 -4.7
First Trading Day of Expiration Week: 1990-2014
#Up-#Down   15-10   18-7   14-11   18-7   16-9
Streak   D2   U1   U1   U1   U1
Avg %   0.3   0.2   0.04   0.2   0.1
Options Expiration Day: 1990-2014
#Up-#Down   12-13   10-15   8-17   10-15   10-15
Streak   D1   D2   D3   D2   U1
Avg %   -0.2   -0.3   -0.4   -0.3   -0.2
Options Expiration Week: 1990-2014
#Up-#Down   14-11   13-12   13-12   13-12   16-9
Streak   D2   D1   U1   U5   U5
Avg %   0.3   0.01   -0.1   0.02   0.2
Week After Options Expiration: 1990-2014
#Up-#Down   10-15   11-14   13-12   11-14   12-13
Streak   U3   U1   U1   U1   U1
Avg %   -0.6   -0.4   -0.5   -0.4   -0.3
February 2015 Bullish Days: Data 1994-2014
  2, 12, 17 2, 9, 11, 12 2, 6, 9, 12 2, 6, 9, 11, 12 2, 5, 6, 9, 11-13
    17, 23 13, 23 17, 23 18, 23, 26
February 2015 Bearish Days: Data 1994-2014
  19, 24 24 20, 27 18, 24 4, 19, 20, 27