Commodity Trader's Almanac 2O11

20

END OF JANUARY LONG S&P 500 TRADE

The best six months for owning stocks begins

in November and runs until April. However, after

the first trading day in January, the market tends to

take a breather. It is at this time that we tend to see

some profit taking for tax deferment purposes.

By the third week of the month, we have had

major economic reports, such as the employment

situation and inflation figures; traders and investors

have had a chance to regain a celebratory mood, as

the Martin Luther King holiday weekend comes to

a close. Traders come back feeling rejuvenated and

see the dip in the market as an opportunity to put

money back to work.

Buying this “January Dip” has a 71.4% success

rate, registering 20 gains with only 8 losses in

its 28-year history. The key is to enter a long posi-

tion on or about January 24 and exit on or about

February 2.

Even in early 2009, during the worst bear

market since the Great Depression, this trade

gained $2,000. More surprising is the fact that

this trade’s best performance came in 2008, just

as the bear market was beginning in earnest.

Though successful again in 2010, the “January

Dip” lasted into early February, but using techni-

cal timing tools such as Pivot support and resist-

ance levels could have improved results. See our

dissection of 2010’s trade situation on page 121.

There are several ways to take advantage of this “January Dip”. One is through the ...