Trifecta payoff: Why stocks will rock in '07
Three indicators with good records, if dubious logic, are pointing to a winning 2007.
NEW YORK (CNNMoney.com) -- Forget your soft economy, housing hangover, American auto funk blues ... the market is going to rock this year.
Why? The indicator trifecta, baby.
Number One ... The January Barometer. That's the one that says if the S&P 500 index goes forward for January, it will go forward for the whole year. This indicator is 91 percent on target since 1950, according to the Stock Trader's Almanac. Well, okay, 75 percent if you weed out the flat line years. Still, that's a pretty good batting average. I like it. Why does it work? Well, some folks have theories about money coming into the market for the new year and portfolio reassessments and whatever. You can read all about that here.
The point is that this January saw a 1.4 percent gain for the S&P. So there's at least a 75 percent shot that 2007 is a winner.
Number Two ... The Presidential Cycle. The pre-election year ... that'd be this one ... usually logs the most gains for the market. That's another Stock Trader's Almanac observation (I love those guys). There hasn't been a down year for the Dow in a pre-election year since 1939. The reasoning behind this one is that the party in power is trying to juice things going into the big contest year. You can read more about that here. I dunno about the reasoning ... I see a lot of gridlock up ahead. But whatever ... pre-election years are up years. Yes!
Number Three ... The Superbowl Indicator. If an old NFL team wins, then the market will gain. This indicator has been right 89 percent of the time. Okay, 78 percent if you rule out years that were an "issue." You can read about that here. The point is, the indicator is another one of those with a pretty good track record ... no possible rational explanation, of course ... but a good track record.
And, hey, the Colts and the Bears both trace their roots to the old NFL. So that's another winner.
Three, count'em, three indicators with winning ways are pointing to an up year. I may as well dump everything into an index fund and go find a beach. Sure, there will be those "serious" types who will pooh-pooh them and point to boring old fundamentals and such. But I bet their track record isn't as good as these indicators. Well, some of them at least.
Party on, Garth.
Allen Wastler is Managing Editor of CNNMoney.com and appears on CNN's "In the Money." He can be emailed at firstname.lastname@example.org.