3 Straight months of gains, Bulls will continue to collect free money!

Discussion in 'Trading' started by S2007S, Feb 28, 2011.

  1. S2007S


    Not only has the market been up for 3 straight months, but I came across this statistic that says in the last 26 times the dow has gained in the first 2 months of the year ONLY once has it finished the year with a loss, which tells you that there is a 96% chance of a positive close for the markets in 2011!!! The bulls can just kick back and not have any worries, the market is on your side this year, I mean 3 straight months of gains and now a statistic showing a 96% of an up year for the markets, whew!!!! Continue to buy the dips no matter what!!!

    Stocks closed February on a strong note, leading to three consecutive months of gains, as all the major indices gained in the final minutes of trading.

    The Dow Jones Industrial Average rose about 95 points, continuing a turnaround that began Friday, after stocks ended higher but still snapped a three-week winning streak.

    The blue-chip index was on track to rise 2.8 percent this month, following a 2.7 percent gain in January. Of the 26 times the Dow gained in the first two months of a year, only once has it finished the year with a loss.
  2. I can accept the theory, but the proof is in the pudding.

    Come back in May and /or June after the resets and then we will have an idea where the market is going.

    From a trading point of view...I don't give a crap...

  3. Locutus


    Perhaps 2011 won't close red but you have to understand that if the first two months are positive, the latter nine must be by definition (on balance) red in order to get a negative close.

    Considering that stock indices have a historical upside bias, it is kind of obvious that if the two first months are green it reduces the odds of a red close significantly. However this does not say anything about whether the market will remain in a range for the rest of the year or go down.

    Years which have a sequence of +5% for first two months and -12% for the middle six and then +13% for the last three also count as green years. The point is, the market has to drop significantly, and basically without rebound, in order to close the year red when the first two months are positive.

    Meaningless statistics. You can tell when a bull run is nearing its exhaustion when everybody is yammering about "OH THE MARKET IS GOING UP BECAUSE IT ALWAYS DOES AFTER 2 GREEN FIRST MONTHS!!!" or "BULL RUNS TEND TO LAST FOR SIX YEARS AND WE'VE ONLY BEEN UNDERWAY TWO!!!" or any other batshit argument that has nothing to do with anything.

    There are barely any fundamental arguments being made at this point on why equity valuations are not quite rich. And yes, they may get more overpriced in the near term, but I would start counting your blessings here if I were a bull. I would not be surprised at one more leg up in this rally, but not much more than that.

    Edit: A statistic that shows what end of year the close was in relation to the close of the second month for the last 150 years or so would be more relevant. If you still get 26 out of 27 or something then I will admit it is a valid point that the market will go up further from here.

    Edit2: Wait a minute, are you being sarcastic?
  4. Generally speaking, I'll agree with that. Truth is we've rallied to far from the start of the year. Unless there is a major crises, year should end up being green. The 21st and 23rd had a great pull back and the yearly high and yearly open are major levels to watch (anything can happen in the next few months). Bears should take over around 11 500-11 000 (if we get there).

    2008 had the first three months bearish then pulled up and dropped lower (April/May). 2007 was green in the first few months and after a pullback ran up again (March).

    Thats my technical view. Now, on such a large time frame fundamentals play a larger role in the market. Having said that Oil and food prices are a concern. Predicting on such a large time frame is difficult (trade what you see not what you think).