Positive First Five Days: Early Gains Hold
By: Jeffrey Hirsch & Christopher Mistal
January 09, 2017
Even though today turned out to be a mixed day for the market (DJIA and S&P 500 down, NASDAQ up), S&P 500 is still positive year-to-date and thus our First Five Day (FFD) early warning system is also positive. Combined with last week’s positive Santa Claus Rally (SCR), our January Trifecta is now two for two. The January Trifecta would be satisfied with a positive reading from our January Barometer (JB) at month’s end.
[S&P 500 January Early Indicator Trifecta Table]
When all three indicators, SCR, FFD and JB, are positive this has been the most bullish scenario for the next eleven months and the full year. In 28 previous Trifecta occurrences since 1950, S&P 500 advanced 89.3% of the time during the subsequent eleven months and 92.9% of the time for the full year. However, a January Indicator Trifecta does not guarantee the year will be bear free. The three losing “Last 11 Mon” years, shaded in grey, experienced short duration bear markets (2011, S&P 500 –19.4% peak to trough). 
A positive SCR and FFD are encouraging and further clarity will be gained when the January Barometer (page 16, STA 2017) reports at month’s end. A positive January Barometer would further boost prospects for full-year 2017. The December Low Indicator (2017 STA, page 44) should also be watched with the line in the sand at DJIA’s December Closing Low of 19170.42 on 12/2/16.