Posted: 14 Jan 2021 04:11 PM PST
With nine trading sessions of the New Year complete, January and 2021 are off to a solid start. DJIA is up 1.26% as of today’s close, S&P 500 stands at 1.05%, NASDAQ 1.74% and small caps, measured by the Russell 2000 are up a whopping 9.14%. These gains all point to and confirm the return of seasonality that we have recently noted.
Last September was weak as it has historically been, then October exhibited it historical tendency toward volatility while November and December were both positive, in line with typical seasonal patterns. A positive Santa Claus Rally and First Five Days are also encouraging indications that seasonal forces are once again tracking. We expect seasonality will continue to present itself going forward as extraordinary efforts are made to quell the pandemic and return to a pre-Covid, open-for-business, way of life.
Due to the reemergence of seasonality, we would not be surprised to see some market weakness in the second half of January next week that could persist throughout the rest of January and possible spill over into February. In the following seasonal pattern chart of January, the last 21 years of data for DJIA, S&P 500, NASDAQ, Russell 1000 and 2000 have been plotted with January 2021 through today’s close plotted on the right vertical axis.
Over the last 21 years, it has been NASDAQ leading at the halfway point, this year it is Russell 2000. Other than that, the major indexes have been tracking their historical patterns fairly well. There was strength early on, followed by sideways action. Should the current trend follow historical patterns then weakness after the eleventh trading day (January 18) is possible.