January 3rd, 2012

First Trading Day Facts

There’s always much said about the relevance of the year’s first trading day and what it might portend for the way the rest of the year ends up so I decided to do my own research based on the S&P 500 Index since 1963 and found what I consider to be some interesting factoids:

 

  • The market closed higher 36, or 78%, of 49 years since 1963.
  •  Of those 49 first trading days in January, about half (26) resulted in a higher closing for the day.
  • When the first trading day resulted in a higher closing, 60% (16) of those years also followed with a higher closing.
  • Of the 23 first trading days that closed down, only 6 years also closed down.
  • The first trading day with the greatest gain was 3.59% in 1988; the market closed 12.40% higher that year.
  • The first trading day with the greatest decline was 2.80% in 2001; the market closed 13.04% lower that year.
  • The best correlations between the first trading day and the rest of the year was when the first days trading resulted in changes of 1% or more.
    • Of the 10 first trading days that closed higher by 1% or more, 8  were followed by higher year-end closes.
    • Of the 8 first trading days that closed down 1% or more, 6 resulted also in lower year-end closes.
  • Of the 31 years when the first trading resulted in a less than 1% change
    • 9 resulted in a lower first day close and 22 with a positive close for the day but
    • more than half (19) of the years closed in the opposite direction as the first day of trading.

For whatever it’s worth, the Bulls must push for a positive close of 1% or more for Tuesday, January 3, 2012 to increase the probability that the year winds up on December 31, 2012 higher than it closed last week; an up close of less than 1% just won’t cut it. Those interested in the statistics can click here .

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