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Things Got Pretty Ugly For Amazon (NASDAQ:AMZN) Yesterday

Adam Hewison - MarketClub

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Yesterday was a doozy of a day for buyers of Amazon. First the stock rallied and closed out the day at $635.35 for a gain of $52 (8.91%) in regular trading hours. Great day, right? 

After the close, Amazon.com, Inc. (NASDAQ:AMZN) released its Q4 earnings which were a big market surprise. In a matter of minutes, Amazon dropped over 13%, closing at $550 in after-hours trading. That is a swing of $85.00 or over 20% in one day!

I outlined on Wednesday that I was neutral on Amazon as the weekly and monthly Trade Triangles were in conflict. When you see a conflict between the weekly and monthly Trade Triangles, it indicates a sidelines position for the stock.

It's the end of the week, end of the month and it's time to talk about the January barometer.

Haven't heard of it? This remarkable indicator was discovered by Yale Hirsh in 1972. The premise of this indicator is pretty simple. When the month of January closes lower than the previous month, it indicates that a bear market is underway. 

Unless there is a tremendous rally by the S&P 500 today, the chances of this index closing lower for the month of January are extremely high. Should the S&P 500 close lower for the month, it would indicate that the market still has further to go to the downside. 

The only other January that was down more than January of 2016 was January of 2009. That year the indicator showed the S&P 500 having a loss of 8.6% for the month. Only to be followed by a drop of over 18% when the S&P 500 bottomed out on March 9, 2009.

This year has the hallmarks of having a similar pattern. Many of the major stocks I track are in bear markets with their long-term Trade Triangles in a negative position.

In the past 62 years, there have only been seven times the January indicator was wrong. That gives it an 88% accuracy ratio. Every down January since 1950 has been followed by a continuing bear market with at least a 10% correction or flattened year. Down Januarys were followed by substantial declines averaging -13.9% which provided an excellent buying opportunity for the longer-term.

I will be watching to see how the S&P 500 closes out January today.

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