There are a lot of “rules” in the stock market that don’t seem to die because more often than not, they work.Take for instance the S&P 5-day rule, which comes from the Stock Market Almanac. According to the rule, the S&P 500 ends the year positive if it ends the first five trading days of the year positive.
It has worked between 80 to 90 per cent of the time.
And it worked last year.
And according to Art Cashin, UBS Financial Services Director of Floor Operations, traders are chatting about it again.
From this morning’s Cashin’s Comments:
What Does Wednesday’s Rally Indicate? – Lots of folks tried to extrapolate Wednesday’s rally to indicator status. As Steven Russolillo of the WSJ notes, the predictability provided by the action of the first trading day of the year is about the same as a coin flip – it’s right 50% of the time.
The first five days of trading, however, have a more discernible record. According to the very helpful Traders Almanac, the last 39 times the market rose in the first five days, it closed up on the year 33 times (84.69%). So stay tuned.