In the USA they have the January Barometer – where the direction of the share market during January has been a reasonably successful predictor for the market direction for the year – with a 90.7% accuracy rate according to Yale Hirsch.
Unfortunately the January Barometer does not appear to hold for Australia – perhaps because of our summer holiday season and other seasonal influences. Over the past 30 years in Australia, the direction of the market in January has a 60% correlation with the direction for the rest of the year.
However, since 1990 the month of February has acted as a reasonable predictor for the remainder of the year in the Australian share market. With an 83% success rate since 1990, the direction of the Australian All Ords. index in February has been a fairly accurate predictor of the direction of the market for the year as a whole. The February Predictor has been 100% accurate where the All Ords. index has moved by more than 3% in either direction during the month of February.
So if you are a longer term trader, or want some probability on your side for the rest of the year, keep a close watch on what the overall market does during February.
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