What the Worst First Week of Trading In History Tells us About the Year to Come

Humans are… well, human.  And that means that they are susceptible to all manner of superstition and importance put on arbitrary dates.  And so, even though the first week of January, when looked at completely objectively, shouldn't be any different than any other week of the year… it tends to have a psychological meaning for many.

Most of the trading in the stock markets today aren't even done by humans.  Goldman Sachs and JP Morgan have computers trading thousands of times per second which makes up for most of the minute-to-minute trading.  But humans are still involved and human action, with all of its psychological and emotional imperfections, still determines the longer term trends.

For this, and many other reasons, the first week, and certainly the first month of the year, has real world repercussions.  It's called the “January effect”.  And it's been proven to be very real.

Forbes explains it this way:

The last 23 down First Five Days were followed by full-year declines 11 times for a 47.8% accuracy ratio and a 0.2% average gain in all 23 years … a positive First Five Days has resulted in a full-year positive equity market some 85% of the time.

When there is negative First Five Days, it is basically a 50/50 proposition on whether the market will rise or fall for the year. Since 2000, the indicator has demonstrated greater predictive power for negative starts to the year, with five down instances leading to three negative years and two modestly positive years:  2000- (-10.1%), 2001- (-13.0%), 2005- +3.0%, 2007- +3.5%, 2008- (-38.5%) 

As Forbes shows, if the first five trading days of the year are positive, the equity markets went on to record a positive year 85% of the time.  If the first five days were negative, it is more of a crap-shoot, but this is because of the inflationary nature of our world today… the markets are going to go up much more often than they go down, due to constant money printing.

So, the fact that the market was down in the first five trading days doesn't guarantee a loss on the year by any means.  However, this wasn't just any first week!  It was the worst first week of trading on most major global markets in history.

To say we are in negative First Five Days territory is an understatement. For 2016, the DJIA reported a 6.2% weekly decline.

The Nasdaq Composite was down 7.3% over the week.The benchmark S&P 500 fell 6%. This was the index’s worst week since 2011. The Dow, meanwhile, fell 1,082 points making this the Dow’s worst week (not first week) since 2011.

The Shanghai index finished down 10% on the week. European stocks suffered their worst week since August 2011.

In order for the Shanghai index to finish 2016 in positive territory, it would now have to rise 11% over the remainder of the year.  And there are no economic numbers that show that is anywhere near possible… in fact, quite the opposite.

When it comes to 2016, just beginning, well… I’ve been issuing a steady stream of warnings about it in articles and videos. Now 2016 has arrived. Shemitah end-day has given way to the Super Shemitah/Jubilee year that is destructive to every aspect of wealth, prosperity and security.

The weakness of US stocks on Friday was particularly telling.

After four massive down days usually the market can muster a decent sized rally.  It's called a dead cat bounce.  Even though the cat fell from a skyscraper and died upon impact, even it will still muster a lackulstre bounce.

This didn't even happen on Friday.  The Dow appears to be deader than a dead cat.

This was even more obvious when the US Labor Department announced 292,000 new jobs were created in December, demolishing the consensus estimate of 200,000.

In a bull market this number would have seen the markets skyrocket.  In this market, the news made no difference. The Dow fell another 167 points.

Markets should have slumped anyway, because the Labor Department's numbers have no bearing on reality.  The actual number of real jobs added in December was 11,000, not 292,000.  But the BLS “seasonally adjusted” the number 280,000 higher!  This wasn't the reason the markets fell, though, as CNBC and most everyone else take the government's propaganda statistics as reality!  And even with the BLS' tortured numbers it still fell.

We warned 2016 was going to be a bloodbath and we've almost already been proven right in the first week alone.

The TDV portfolio is showing all green for the first week.  Your average person who watches CNBC is deeply in the red.

2016 is going to be an insane year.  Mark my words.

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If the first week of the year is any indication, and it often is, as the January effect shows, it is going to be a horrible year for most… and a tremendous year for those of us who are prepared.