{"id":12596,"date":"2018-11-26T13:39:02","date_gmt":"2018-11-26T18:39:02","guid":{"rendered":"http:\/\/leavittbrothers.com\/blog\/?p=12596"},"modified":"2018-11-26T13:39:02","modified_gmt":"2018-11-26T18:39:02","slug":"wayne-whaleys-toy-barometer","status":"publish","type":"post","link":"https:\/\/blog.leavittbrothers.com\/?p=12596","title":{"rendered":"Wayne Whaley's TOY Barometer"},"content":{"rendered":"

Wayne Whaley’s TOY Barometer is possibly the single-best seasonal barometer. It uses the market’s performance between Nov 19 and Jan 20 to predict 12-month forward gains. It was brought to my attention by Steve Deppe (@SJD10304<\/a>) and is worth discussing.<\/span>
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\nMr. Whaley was a quant before quants existed. He has a background in math and has been managing money since the late 1980’s.<\/span>
\nHe considers the TOY Barometer to be the single most reliable seasonality barometer of forward stock market returns – so much so that he’s said if he could only make one trade\/year based on one indicator, this is the indicator he’d use.<\/span>
\nWhaley’s goal was to identify what he called the “kingpin of seasonal barometers.” He stated: \u201cI implored my computer to take a few seconds to exhaustively study S&P performance over every time period of the year and determine which time frame\u2019s behavior was proprietor of the highest correlation coefficient relative to the following year\u2019s performance.\u201d<\/span>
\nWhat he found was there was a high correlation between the S&P 500’s returns between November 19th and the following January 19th and the S&P’s performance of the 12 months following January 19th. And since the 2-month period straddled the turn of the year (TOY) and gift giving season, he called it the TOY Barometer.<\/span>
\nSpecifically, the period studied is November 20 – January 19 (if Nov 20 is on a weekend, use the Monday after the weekend, and if Jan 19 is on a weekend, use the Friday before). He only considered the price-only return (no dividends).<\/span>
\nIf the return during this 2-month period was greater than 3%, a bullish signal was given, and the market was very likely to do well over the following 12 months. If the return was 0-3%, the signal was considered neutral, and results were somewhat random and in line with what is considered average. And if the return was negative, a bearish signal was given, and returns tended to be very poor.<\/span>
\nSince 1950, there have been 34 bullish signals (not including the one that’s currently in place from the S&P’s close on January 19, 2018), 19 neutral signals and 15 negative signals. Let’s look at each signal group.<\/span>
\nBullish Signals<\/strong><\/span>
\nThe 34 bullish signals have led to gains 33 times the following 12 months. The lone loss was 1987, the year of one of the biggest single-day crashes in history. The average and median gains of the 12 months that followed the signal were 17.0% and 15.1%. A 97% win rate with a 17% average gain is impressive. Here are the stats.<\/span>
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\nNeutral Signals<\/strong><\/span>
\nThere have been 19 neutral signals. The following year was positive 12 times (63%) and negative 7 times (37%). The overall average and median returns were 6.0% and 7.1%. But among the “up” years, the average and median gains were 14.2% and 9.4%, but when “down”, the average and median losses were -8.5% and -7.8%. There were several big up years (1995, 1996, 1998, 2003), and two big down years (1973, 1977), so even if there is a neutral signal, there’s still a decent chance the following 12 months will venture far from its January 19 print. Here are the stats.<\/span>
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\nBearish Signals<\/strong><\/span>
\nOf the 15 bearish signals, only 5 of the following years posted a gain while 10 posted losses. And 6 of those 10 posted double digit losses. The overall average and median returns were -5.5% and -6.8%. The “up” years posted average and median gains of 12.6% and 10.7%, while the “down” years posted average and median losses of -14.6% and -12.9%. Here are the stats.<\/span>
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\nHere’s a quick table summarizing the stats.<\/span>
\nThe bullish years are significantly better than “all” years while bearish years are, on average, much worse. Neutral years are slightly worse than “all” years.<\/span>
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\nWe got a bullish signal in January of this year because between November 20, 2017 and January 19, 2018 the S&P gained 9.0%.<\/span>
\nThe S&P closed on January 19, 2018 at 2810.30, so unless this year is to join 1987 as only other year the signal failed, the S&P will have to rally ~ 140 points between now and January 19, 2019.<\/span>
\nLast Monday, on November 19, the S&P closed at 2690.73. This is the level we have to watch for in two months on January 19.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Wayne Whaley’s TOY Barometer is possibly the single-best seasonal barometer. It uses the market’s performance between Nov 19 and Jan 20 to predict 12-month forward gains. It was brought to my attention by Steve Deppe (@SJD10304) and is worth discussing.<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[3],"tags":[],"_links":{"self":[{"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=\/wp\/v2\/posts\/12596"}],"collection":[{"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=12596"}],"version-history":[{"count":0,"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=\/wp\/v2\/posts\/12596\/revisions"}],"wp:attachment":[{"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=12596"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=12596"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=12596"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}