As this Wall Street Journal article points out, the first five day indicator is looking bad this year. The basis of this indicator is that in years when the first five days are positive for the market, the market has a tendency to finish the year up. In years where the first five days are negative, the market has a tendency to finish the year down. There was a lot of bullishness coming into 2007, and that can be a contrarian signal. (See 'Too much of a good thing' and 'Smokey the Bear says: "Only you can prevent portfolio losses."')
Energy in particular has gotten totally clocked out of the gate. Sure, the freakish warm weather had a lot to do with it, but I would also say the magazine indicator strikes again.
This article mentions that technology has done very well so far in 2007. In my own sector analysis work, I also find technology an interesting place to focus on in 2007. Which doesn't quite mesh with my bearish bent for 2007, but I try not to let my own peccadillos get in the way. My sector work also doesn't highlight energy this year.
By the way, check out this demo of the Apple iPhone. Wow. Keep an eye on that stock.
WSJ: A Rocky Start to 2007 for Stocks. [$]
The first five trading days of the year are over, and if they are any indication of how the Dow Jones Industrial Average will perform in 2007, traders may be in for a rocky ride.
On Tuesday, the Dow industrials fell 6.89 to 12416.60, leaving the blue-chip average down 0.4% so far this year. Since its inception, when the Dow has finished the first five trading days in the red, it has risen for the full year just 49% of the time. In contrast, the Dow has risen in 73% of the years in which it finished the first five days in the black. In all, the Dow industrials have risen 71 out of 110 years, or 65% of the time.
"The first week predicts the month, and January predicts the year," said Phil Roth, chief technical analyst at Miller Tabak. "We are solidly down the first five trading sessions, and it's starting out looking ominous." Mr. Roth said this is the time of year when stocks are "almost always strong," with new money coming into the market. But that money is not appearing, he said, suggesting investors are putting it to work elsewhere.
The broader market was mixed, pulled down by the energy sector as crude-oil prices extended last week's slide. The Standard & Poor's 500-stock index was off 0.73 at 1412.11, also down 0.4% for the year. But technology stocks were a bright spot, with the Nasdaq Composite Index up 5.63 to 2443.83. The tech-heavy index is up 1.2% so far in 2007.