Tag Archives: Trading

A deep dive into the January barometer

So as it’s still a rather fresh 2011, and January so far is looking a little mixed, I thought it would be fun to do a deep dive into a calender effect called the January Barometer. Many people seem to confuse this with the January Effect, but they are different things.

The January barometer states that the direction (of the S&P 500 at least) during January can be viewed as an indicator for the following 11 months. So in other words, if the S&P 500 ends up this January, that would be an indication of a good coming year overall and vice versa.

There’s no specific reasoning given for why it should be like this. One could theorize that there might be some form of structural break as we enter a new year with new budgets and everything. So say the general economy was heading up, then more would be invested, starting in January and then continuing.

But why just theorize? There’s easily available data we could download and look at. And that’s just what I did.

My portfolio performance

It’s been a few years since I created my own trading system, and I think it’s time to do a review of the performance. The strategies reviewed here have remained unchanged for this period, and the portfolio consists of in total 9 different stocks, all part of the OBX index. There are several distinct strategies, and based on back-test performance (three years ago) a stock/strategy combination was selected so that of the 9 distinct stocks my portfolio would consists of 20 separate stock/strategy combinations.

My portfolio shows a fourfold increase over the period, using an equally weighted portfolio of all the stock/strategies available. This is not based on back-testing, but actual trading signals that I could and in fact did trade on.