I read with interest Stephen Bland’s anti New Year message over on The Motley Fool. I agree wholeheartedly that prediction is usually futile in the markets, in the sense that it is futile predicting on 1 January 2013 that the FTSE will have reached a particular value by 31 December 2013. But on one important point I disagree:
Stephen asserts that there is no point believing in “The January Effect” or “Sell in May, and go away…” because (I quote): “Shares and the market don’t know it’s New Year any more than poker chips or racehorses do.“
Maybe “shares” don’t know it’s New Year, but investors in those shares do. And if enough of them believe in the January Effect prophecy, it will become self-fulfilling. Investors influence share prices in ways that they cannot possibly influence purely random poker hands.
In a similar vein there may be nothing at all special about the FTSE 100 at the mathematically-arbitrary 6000 level, but investors do like their “psychologically significant” round numbers don’t they? Which may explain why the FTSE had such trouble breaking through this barrier; and why it might not be about to stop now that it has broken through. Well, maybe.
Two Steps to Better Spread Betting:
Disclaimer: this posting is for general education only; it is not trading advice.