Predicting Market Directions: The Myth of the Five-Day Index

    by Mark Hulbert

    The stock market rally that began last fall must be on its last legs. Bullish advisers are scraping the bottom of the barrel in their attempts to come up with rationales as to why investors should continue betting on it.

    Consider one of the arguments that is currently widely cited among the bullish newsletters that I monitor: Because the stock market produced a sizeable gain over the first five trading days of this year, 2002 as a whole will be smartly bullish too.

    For example, John McGinley, the editor of Technical Trends, writes that when the market goes up during the first five days, “it almost always indicates that the market will go up” during the year.

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