Tuesday marked the fifth trading day of the year and from experience, the results from these five days can tell us a lot about the year to come. Luckily, the first five days of 2019 ended on a positive note which, in most cases, indicates growth is on the horizon.
But what are the predictions for 2019 and what is the five-day rule?
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The Five-Day Rule
If we look at history, the first five trading days of the year can tell us a lot about the coming 12 months.
Usually, when the stock market soars during the first five trading days of the year, the market continues to grow and will end the year on a positive note.
In fact, since 1950, the first five days saw gains on the market 44 times, and in 36 of those years, the market ended the year even higher.
Jeff Hirsch who’s the editor-in-chief of Stock Trader’s Almanac told CNBC that “positive investor and trader behavior at the beginning of the year shows that there are good economic and market readings out there.”
Hirsch also added that if the rest of January continues on this path, the possibility of 2019 being a strong year increases, referring to the Wall Street saying “so goes January, so goes the year.”
In other words, based on the five-day rule, we could have an excellent year ahead of us. Better yet, according to history, the five-day rule is even more correct during pre-American-election years such as 2019.
Just beware that this is a statistical prediction that doesn’t have a base in either technical or fundamental analysis. Although a success rate of over 81 percent is enough of an indication that it shouldn’t be ignored, something that ex-chairman of Goldman Sach’s Jim O’Neil agrees on.
Trading Predictions for 2019
As mentioned, the first five trading days of 2019 were positive with the S&P 500 gaining a total of 2.2 percent, and by the looks of it, we are in for a strong year.
Also, even if we look past the five-day rule and focus on more traditional predictions, we still find good indications.
For example, the tech industry is looking strong despite a few weeks of recent turmoil, and there is little doubt that the FAANG stocks will do anything but continue to rally.
In addition, the car industry is preparing for some major developments in 2019. General Motor’s CTO Jon Lauckner is predicting that self-driving cars will be on the market this year with Tesla, BMW, Volvo, Mercedes, and more paving the way. In turn, this will give the car industry a massive boost that will trickle down to companies such as Uber, Lyft, Nvidia, etc.
Cryptocurrencies are another market that is expected to rally in 2019 after experiencing a brutal 2018 with extended losses across all assets. In fact, the market is already showing more strength than it has in many months, and an increasing global interest in blockchain technology will definitely help.
The only market that is looking a bit unpredictable right now is the forex market. This is mainly due to the Brexit deal that will reach its deadline in March as well as worries that the Fed will hike the interest rates again pushing the dollar into a downward spiral.
However, when asking the major forex brokers in the UK about the upcoming year, they all seem optimistic.
The Forex Market is by far the biggest market in the world and we are sure that it will remain that way 2019.
Is the 5 day rule really proven?
Whether or not you want to believe in the five-day rule is up to you, but the statistical success of the theory is enough not to be ignored.
Moreover, besides indications based on historical data and 5 positive days on the American stock market, a majority of other predictions for the year also indicate that 2019 will be a great trading year.