The conflict in Iran has now brought oil and maritime traffic in the Strait of Hormuz to a near standstill. The situation remains fluid. Fresh attacks on shipping vessels and Iran’s new supreme leader vowing to keep the strait closed have pushed oil near $100/barrel and markets to 3-month lows, triggering the December Low Indicator on both the DJIA and S&P 500.
In the
February Outlook and member’s webinar we brought your attention to “The December Low Indicator” which has been featured in the
Stock Trader’s Almanac for years (STA 2026 page 36). Originated by Lucien Hooper, a
Forbes columnist and Wall Street analyst back in the 1970s, the December Low Indicator is based on the Dow closing below its December Closing Low in the first quarter of the New Year. DJIA’s December closing low was 47289.33 on 12/1/2025.
The study we presented examined the implications for the market based on the S&P 500 closing below its December Closing Low of 6721.43 on 12/17/2025 with respect to our
positive January Barometer reading this year. Years when the S&P 500’s December Low Indicator was breached and the January Barometer was down, were weaker years. When January Barometer was up and the December Low was crossed, the years were stronger.
As you can see on page 36 of the 2026 STA and in the February Outlook, when the market closed below its December Closing Low in the first quarter of the year, the market dropped, on average, another 13.5% on the S&P 500 and 10.9% for DJIA. Now that the December Low Indicator has been triggered on both DJIA and S&P 500, some caution is in order.
However, of the 36 December Low Indicator triggers on the S&P 500, this is only fourth to occur in March, and the sixth among the 39 DJIA triggers. So, we have broken out the S&P December Low Indicator (DLI) triggers by month in the tables below. It is not surprising that most of the DLI triggers in January and February were accompanied by a down January Barometer (JB). Whereas all four March DLI triggers came in years JB was positive.
January DLI triggers were followed by further declines of 12.92% on average with full-years up 14 of 24 with average gains of 1.30%. The eight February DLI triggers were the worst, averaging further drops of 17.26% and down 6 of 8 years for an average 8.13% full-year loss. The three previous March DLI triggers saw the mildest average decline of 8.12%, with one year up and two down, averaging a 3.70% full-year loss.
Positive January Barometer – Year Higher 89.1% of the Time
When our S&P 500 January Barometer is positive as it was this year, the full year is up 41 of 46 years or 89.1% of the time for an average gain of 16.95%, the next 11 months are up 87.0% of the time for an average gain of 12.24%. When it’s down, the year is up only 50% of the time with an average loss of -1.75% and the next 11 months are up 60% of the time with a paltry average gain of 2.07%.
While the current situation suggests the market is likely to go lower in the near term, the positive January Barometer and the fundamental and macro backdrop remain supportive. So, when the indexes and your spirits are down and the contrary sentiment indicators have reached extreme bearish levels, e.g. >40 VIX and
Investors Intelligence Bearish % exceeds Bullish %, that’s probably the point at which the market will turn higher again.