The effect January in Stock Exchange

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07-01-2009 | Javier Gomez

The effect In January in Stock Exchange is one of these "nails" on which there like to fight those who move his savings on the stock markets, with the hope to be able to move forward the future and quarrel in what direction the quotations will move throughout the year.

In fact they neither are but psychological factors (with certain statistical base, of course) but that neither have any material base, nor are a 100 % trustworthy.

The acquaintance as effect In January is that one according to which, it is important to be fixed in the first week (the first 5 meetings in Stock Exchange) of the year to know how this one will move throughout the year. If the Stock Exchange registers profit at the end of these first five days, it is said that the year will be upward. This is perhaps his most strict concept, because with the step of the years it has been extended or has been "changed" up to extending the effect to every January, so that what is cited as an example is January 31.

But if we abide by the statistics, which is the one that after all, this psychological effect has created, this one says to us that when the first week of Stock Exchange of the year has registered profit, in 28 of last 33 times, the year also has registered profit, and that only when there have been exceptional events, as it could be the crisis of the oil of 73, ésto it has not been fulfilled.

Curiously, 2008 has been a clear example of what was a good alert for those who were following this "indicator". And the fact is that in spite of five years of rises that we were bringing in Stock Exchange, and of the optimism that was reigning at that time, January, 2008 it was the worst in the whole history, losing more than 2.000 points, what according to so brought “effect In January” was meaning that a strong downward year was waiting for us, as finally like that it happened.

But if it is necessary to look for a logical base to this effect: which would this be?

- The most important is in the portfolios readjustment. We have the whole year ahead to invest and desinvertir, and the majority they form his portfolio and buy according to his future expectations. Psychologically, if we are wrong with these investments in January we are still 11 months old ahead to rectify, for what many buys oncentran in this month, which is usually, usually, of enough volume.

- The traders also, they have the whole year ahead to give results to his clients, and it is in December / January, when they receive his budgets to formalize the portfolio of 2009.

Generalment, and and for these reasons, January is usually a safe positive month in few occasions, like last year. From 1960, 80 % of the years has had a positive January.

But I repeat, a lot of care, because this type of effects usually fails the more volatile and illogical the markets turn, and we come of one year, 2008, very volatile, marked for a strong pessimistic feeling, and also, with certain dose of illogical that makes think that certain values have been excessively punished. We still have left enough frights and enough economic news that will shiver the international markets. And when ésto it is like that, the Stock Exchange tends to accentuate the effects.

We have begun well the year, yes, but we already will see how we finish, first of all, the first week of Stock Exchange, and secondly, finished January.

To read more on: Stock Exchange, economic Concepts
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