Here's the Deal with Markets - January 6, 2025

Economy: In Slowdown

Market Cycle: Bullish under Pressure

_{Week 1 of 52 for 2024: 0.2% of the way through 2025}

This Weeks Market Performance

A little late with this week’s Here’s the Deal with Markets as I am putting the finishing touches on the 2025 Forecast.

Trust me. It’s definitely worth it…

Markets began the first week of the year in a short-term downtrend. However, Friday was a turning point as indices had a strong day with many individual stocks putting in monster 10-20% gains in a single day. Some of which were highlighted in this year’s The January Effect post, as many of those continue to rip higher with massive gains in short periods of time. Exactly the sort of thing you would expect to see at this point in the credit cycle, calendar, and Bull Market.

With that being said, markets have begun the year on a rather ominous tone as the Santa Claus Rally, or rather lack thereof, flashed a possible early warning sign for 2025.

Contrary to what most people think, active market participants included, the Santa Claus Rally is an actual event which encompasses that last five trading days of the year and the first two trading days of the new year. When used properly, it can be used to help assess market expectations in the coming year.

According to Stock Trader’s Almanac, the Santa Claus Rally has provided an average return of 1.3% since 1969. However, this year all of the indices were negative during this time as the fat sugar-addicted jerk apparently decided not to grace us with his presence.

So, why does that matter? Because, according to the founder of Stock Trader’s Almanac, Yale Hirsch, “If Santa Claus should fail to call, Bears may come to Broad and Wall.”

Meaning, if the markets are negative for those 7 trading days, from the opening bell on Dec 24 to the closing bell on Jan 3, then history suggests markets might be in for a rough 2025. For reference, a couple of other years Santa failed to show were 2000 and 2008.

Yikes.

While not great, it’s also not the end of the world as it is only one indicator. There are a few more to keep an eye on at this time of the year which are helpful as well. They are:

• January’s First Five Days (Markets with a positive return through the first five trading days of the year tend to to have positive performance for the year. 83.3% accuracy rate over the past 48 years.)

• The January Barometer (As January goes, so goes the rest of the year. 83.8% accuracy rate since 1950.)

• January Indicator Trifecta (A combination of the Santa Claus Rally, January’s First Five Days, and the January Barometer. When all three are positive, the market has ended the year positive 90.6% of the time the past 32 years. When one is down the odds of a positive year drop to 59.5%.)

• December Low Indicator (Should the Dow Jones Industrial close below its December low at any point in Q1, it is a significant warning sign for mrket performance that year.)

***All of these were first discovered by Yale Hirsch, founder of Stock Trader’s Almanac. Again, I cannot recommend it enough if you are interested in learning about markets and the economy. If you trade or invest, it is an absolute must.***

Much like trading, you want to use all of these indicators weighted together to get a sense of what to expect out of markets throughout the rest of the year. They are not all equal, as some are more important than others. Yet, if they all go in the same direction, they tend to help provide some pretty powerful insights.

As for now, Santa let us down.

Earnings This Week

The Week Ahead

***Markets will be closed this Thursday, January 9th for the National Day of Mourning for former President Jimmy Carter’s official state funeral.***

Economic Data to watch:

WTF of the Week

Dude packs fireworks and fire accelerants into the truck he is renting, sets fire to it, and then commits suicide.

The Associated Press decides it’s good and factual journalism to portray the story as though the truck just mysteriously bursts into flames.

Headlines like this one are a perfect example of why Legacy Media is dying of self inflicted wounds.

Worst part is, that headline has still not been changed.

Reminder, these are the very people who want to dictate to you what is and is not misinformation and what you should be allowed to read and hear about.

Perfect example of why it is so important to do your own research with an open mind to any outcome when it comes to important topics and/or market and economic information.

Quote of the Week

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