The 2022 stock market is a year most traders are happy to put behind them. As the saying goes, ‘in a bull market, everyone makes money, and in a bear market, nobody does.’
The 2022 January barometer looked bleak from the start. In the end, we had one of the worst bear markets in years. Review the 2022 January Barometer results from last year in this blog post.
Now we are at the end of January 2023; what's the January Barometer forecasting for this coming year?
In this post, we’ll look at a few studies that give us a forecast for the year:
The January Barometer has an extremely high accuracy rate of over 80%, so it’s an important tool to pay attention to as a stock market trader. If January's performance is positive, the rest of the year will likely be positive.
The Dow Jones Industrial Average, also referred to as the Dow, is a stock market index of 30 prominent companies in the USA. It’s one of the oldest and most widely used stock market indices, and we can analyze it as a barometer for the entire market.
First, let’s look at the long-term DJIA chart dating back to before the late 1800s.
Brian often talks about the Fear/Greed cycle, shown here on the DJIA chart. We are now into the Millennial Greed Cycle, and if you zoom into this cycle, you can see 2023 between the two green dotted lines.
Looking closer at the January Barometer for this chart, you can see that it mirrors other studies in this post. This study also suggests sideways bottoming action, with a generally bullish outlook for the year.
In previous posts, we’ve talked a lot about the Benner Cycle, anticipating this year as a year that is likely to mark a bottom in the market. Read more about the Benner Cycle here: Predicting 100 Years of Market Movement
This study is significant because there are several years between each pivot. The next important year will be 2026 when Benner says it will be a good time to be a seller.
You can pick up a Benner Cycle mousepad at the TRI shop!
The Decennial Report is a study of every year ending in the same number. Expert analyst Larry Williams likes to use this study and references Edgar Lawrence Smith who first presented the Decennial theory in his book Tides in the Affairs of Men in 1939.
One of our advanced traders at TRI, Cole, specializes in cycles and cycle theory and shared his version of the 2023 Decennial Pattern based on every year ending in 3 starting from 1949.
The Pre-Election Seasonal Pattern, refers to a historical analysis of presidential term years and how they affect the market. The study for this year suggests that markets typically perform well during this period, with more volatility leading up to the election.
In the new Stock Traders Almanac 2023, Jeffrey A. Hirsch shared this pre-election seasonal pattern. This is yet another signal that the market wants to bottom this year and push higher, although it suggests this will be a slow grind up with a lot of price washing in both directions. Here's a link to the Stock Trader Almanac 2023:
One way to see how a bottom may appear is to use a Wyckoff Accumulation Study. Richard Wyckoff is a famous investor who outlined market movement methods based on institutional investing. Traders and investors use these patterns to identify market trends and make profitable trading decisions.
In a bottom (Accumulation period), the market can often mirror the Wyckoff Accumulation study.
Bitcoin is in its first year of a four-year cycle, with the halving coming up in early 2024. This year it will likely mirror the market and have a sideways bottoming year, with a potential secondary test of the lows as suggested by the Wyckoff accumulation pattern.
Bitcoin also tends to bottom around six months before the halving event, meaning this year, we should see a bottom in Bitcoin and the start of a new crypto bull cycle. Here’s Brian’s breakdown of the 4 year Bitcoin Halving event.
One TRI’er shared this 4-year bitcoin pattern chart, suggesting that although we are at the bottom of the cycle, there can be a lot of chopping up and down as we carve out a saucer bottom on BTC before the bull resumes.
This post looked at the January Barometer, Wykoff accumulation, 2023 Benner Cycle Low, S&P Pre-Election Year Seasonal Pattern, and the Decennial Pattern. All suggest that we will see a bottom this year, a lot of sideways chop, and likely ending the year higher than we started it.
The best way to understand how this year may play out is by listening to the wise words of Samual Benner.
“Years of hard times, low prices, and a good time to buy stocks “Corner Lots,” Goods, etc., and hold till the “Boom” reaches the years of good times; then unload.”