The Week Ahead (4 March 2007)
Minyanville recently reported:
“When the Dow closes below its December closing low in the first quarter, it is frequently an excellent warning sign. Jeffrey D. Saut, Managing Director of Research, and Chief Investment Strategist at Raymond James, brought this to our attention a few years ago. The December Low Indicator was originated by Lucien Hooper, a Forbes columnist and Wall Street analyst back in the 1970s. Hooper dismissed the importance of January and January’s first week as reliable indicators. He noted that the trend could be random or even manipulated during a holiday-shortened week. Instead, said Hooper, ‘Pay much more attention to the December low. If that low is violated during the first quarter of the New Year, watch out!’
Thirteen of the 27 occurrences were followed by gains for the rest of the year – and twelve full-year gains – after the low for the year was reached. For perspective we’ve included the January Barometer readings for the selected years. Hooper’s ‘Watch Out’ warning was absolutely correct, though. All but one of the instances since 1952 experienced further declines, as the Dow fell an additional 10.5% on average when December’s low was breached in Q1.
Only three significant drops occurred (not shown) when December’s low was not breached in Q1 (1974, 1981 and 1987). Both indicators were wrong only three times and six years ended flat. If the December low is not crossed, turn to our January Barometer for guidance. It has been virtually perfect, right nearly 100% of these times (view the complete results at www.stocktradersalmanac.com).”
-The Stock Trader’s Almanac
The December low in question was 12,194, and it was breached by Friday’s closing low. The fact that it was a weekly close probably added some additional significance for the chartists out there. Our readers know we have been bearish, particularly on tech stocks. We looked pretty dumb there for a while, less so now. We’re more interested in finding some good stocks to buy than in looking smart, however.
The major report on the Economic Calendar this week is the employment report on Friday. Consensus expects 95,000 jobs added on a month/month, seasonally adjusted basis. We think that basis is full of beans, and will be expecting something on the order of 2 million jobs (plus or minus a hundred thousand or two) on a year/year, unadjusted basis.
The earnings calendar is also light. None of our Watch List names are scheduled to report. However, Finisar (FNSR - Monday), National Semiconductor (NSM - Thursday) and Tech Data (TECD - Thursday) should offer some further insight into the technology outlook.
Like this article? Why not try out:
