December low violated on Inauguration Day

In the 1970's Forbes columnist and former Wall Street trader Lucien Hooper came up with "The December low" indicator as a statistic now commonly watched in the Stock Trader's Almanac. Hooper believed that "the January indicator" was not enough in predicting how the markets would trend in the coming year.

Hooper discovered that if the Dow Jones Industrial Average closed below the lowest December close at any point in the first quarter of the following year, the Dow would continue to decline on average another 10% from the point the Dow breaks the December low. Hooper's statistic has worked in every instance except two (1996 and 2006) since 1952.

With the December closing low of the Dow at 8149.09 and the S&P 500 at 816.21 on Dec 1, today's 5% declines on inauguration day of all days puts both averages (DJIA 7946.22 and SPX 816.21) in danger. While in 13 of the 27 cases, the averages would rebound to finish positive for the year, it feels like there needs to be more pain before the markets can begin the healing process, notwithstanding the United Kingdom's request for a second bailout for banks and rumors that the entire banking system of the UK is insolvent.

YTD +.4%