Thursday, January 31, 2013

Super Bowl indicator says up

Superstitious investors watch the Super Bowl results closely to get a sense of where the market's going. It sounds rather silly, but the so-called Super Bowl Indicator is often correct.

But this year, the prediction is a little odd. According to the indicator, stocks will go up this year no matter which team wins the championship.

The indicator says the market will rise when a team from the original National Football League wins the Super Bowl. This goes back to the time when there was also an American Football League in operation from 1960 to 1969. The AFL teams became part of the NFL in 1970.

This year, both teams hail from the original National Football League. Well, the Baltimore Ravens technically didn't exist until 1996, but the team originated from the Cleveland Browns, which was part of the NFL. So it counts, right? One could argue that the San Francisco 49ers might have a little more NFL cred, so maybe investors should be rooting for a 49er victory.

At any rate, it seems like this year's game is a big green light for jumping back into the market. But wait, let's look at what happened the last time two original NFL teams played each other. That happened in 2001, when the Ravens absolutely trounced New York Giants.

That was not the best year for the markets, according to the Wall Street Sector Selector site. The Dow Jones Industrial Average ($INDU -0.36%) fell 7.1% and the Standard & Poor's 500 Index ($INX -0.26%) fell 13.04%.

In other words, don't rely on one football game for your investing strategy this year. But if you want another sign that stocks might behave nicely this year, check out the "January effect." MSN Money's Charley Blaine writes that this indicator shows that a higher market (measured by the S&P 500) in January leads to a higher market for the year, and it's correct about 75% of the time.

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