Watch the First 5 Days

They’ll Set the Tone for All of 2007

By Bryan Bottarelli
Tuesday, January 02, 2007 12:58 PM EST
Tue, 2 Jan 2007 17:58:00 GMT

Dear Bottarelli Research Member,

As we get set to begin a new trading year, lets’ pay special attention to the overall trading action of January 3rd, 4th, 5th, 8th and 9th.

Why are those days so important?

Because those days mark the first 5 trading days of 2007 — which have historically served as a very strong barometer for the entire trading year.

If you’re a follower of the Stock Trader’s Almanac, you’re familiar with the fact that the last 35 times that the first five trading days of the year ended higher — the markets closed with a yearly gain 30 times. That’s an 86% accuracy rating.

What’s more, this January indicator has its highest correlation in odd-numbered years when new Congresses convene — which makes the first five trading days of 2007 even more significant.

At the same time, we have a market that has remained at elevated levels against all historical odds. For example, the current market has gone longer without a 9% pullback more than any other market in history. All it’ll take is one inflation scare to push the indices squarely in the red — which is why I’d like to maintain our protective DIA February 120 Puts (DAW NP).

What’s more, the Dow has gone 912 days without a one day drop of 2%. The last time the Dow dropped over 2% in one day as May 19th of 2003, making this the longest calm-water stretch dating all the way back to 1900 and once again supporting the argument to own downside. Although it may seem like these protective puts do nothing but deteriorate in value, the moment the market turns lower you’ll be glad that you own them.

So like I’ve said before, the attack plan is to play the market strength as long as possible — while at the same time being protected against a pending sell-off. As I mentioned last week, we have a handful of great trading opportunities lined up, and I look forward to profiting off them all starting tomorrow. Until then,

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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