When it comes to investing, we found no shortage of theories linking various phenomena with the final results of the exchanges. And that human psychology is invited to pursue numerous strategies or guidelines that have been repeated over the years to try to guess how the market will behave.
Every theory is an attempt to impose some sort of consistency or stable to the millions of decisions that make buying and selling on the market run frame.While it is useful to know these theories, it also is important to remember that no unified theory can explain the financial world completely.
Before reviewing the five trading theories, we must add that in most of them the sectionalism events and one aspect of “cause and effect” more or less visible have been the ideal combination for final formulation. But theories are just that and should not be taken into account for the final investment decision.
The indicator Harvard MBAs
Known as the indicator of MBA from Harvard, he assesses the percentage of graduates MBA from Harvard Business School who accept related jobs market in areas such as investment banking, stock sales and trading, private equity, venture capital , etc.
Based on this indicator, if more than 35% of graduates in one year goes to work in those areas, the Harvard MBA Indicator creates a sell signal for stocks . Conversely, if less than 10% of graduates take jobs in this sector, which represents long – term stock a buy signal.
Initiated and maintained by consultant Roy Soifer, the indicator signaled perfect Harvard sell signals in 1987 and 2000, which were both terrible years for the stock market. The indicator, somewhat exotic, is intended to represent long – term signals based on the relative attractiveness of jobs on Wall Street.
Currently, young Harvard are not going back to Wall Street with the numbers they did before the financial crisis. As you can see in the chart, only 31% of students headed for finance or consulting in 2014 while in 2007 it was 47%.
Skyscrapers and stock crash
There is a curious fact, when a country’s economy stands out above the rest, skyscrapers sprout in their cities. But paradoxically, once the construction of the tallest buildings in the world is finished, economic crises occur on a large scale.
The most striking example, which has already become a classic, was the Empire State Building in New York . The final touches of this great building high 381 meters were completed in 1931, coinciding with the peak of the Great Depression.
In 1972 the twin towers of the World Trade Center were built in New York. The north tower was the second tallest skyscraper in the world after the Empire State Building.Shortly thereafter, in 1973, a strong economic crisis by the rise of oil broke.
Meanwhile, the construction of the Petronas Towers in Kuala Lumpur coincided with the peak of the financial crisis in Asian markets in 1998.
Today, the index skyscraper is being tracked by the investment bank Barclays, and its experts have recently sounded the alarm about a possible imminent collapse of the world economy.
According to them, this time the shock wave can come of this, where it is building the world’s tallest building. The highest skyscraper will be in the Kingdom Tower in Saudi Arabia (almost a kilometer high), the second Sky City in China (838 meters, 10 higher than the Burj Tower Khalifa Dubai meters), and India, which will build the tallest residential building in the world (442 meters).
The January Barometer
For investors, January is without doubt one of the most used to see how it will develop barometers year. The theory says that the movement of the bag January sets the direction of the market for the year. This pattern was discovered by Yale Hirsch in 1972.
Overall, the January Barometer states that if the stock market in late January has increased, investors would expect a bullish year. Conversely, if January has closed in the red, consequently the year will close in losses.
Specifically, if January is a positive close, there are 77.9% chance that the US stock market closed in green. However, if January is down, about 50% of cases the annual closure of the US Selective will be negative.
In other words, when January is negative, the January Barometer lacks reliability, a simple “heads or tails”. Therefore, the predictive power of January barometer has greater reliability if January is bullish and bearish no.
The indicator of the height of the skirt
Among the curious theories, surely one of the most highlight is the “height of the skirt.”The idea is that the length of skirts is a predictor of market direction. According to the theory, if the skirts are short, it means that the markets are rising. And if the skirt is long, which means the markets are headed down.
The idea behind this theory is that shorter skirts tend to appear at a time when there is increased consumer confidence and optimism high , which means that markets remain bullish behavior. On the contrary, the theory says long skirts are used in times of fear and pessimism in general, indicating that would be linked to a bear market.
This theory was developed by economist George Taylor in the early twenties. At that time, in the roaring twenties, women’s fashion led to a shorter skirts, however after the crash of ’29, long skirts were the fashion that prevailed.
The premises that you are trying to validate this theory are twofold. On the one hand,spending on beauty products decreases in the years of crisis that would justify greater length skirt. On the other hand, the feeling of an economic context of crisis or depression would be an influential factor emotional.
Nevertheless, costs find valid today. The current fashion offers lots of clothes and outfits for all tastes and skirt is an element that has been losing ground in recent years.
The outcome of the Super Bowl and the bag
The Super Bowl, the annual championship game of American football face the champion of the National Football League (NFL) and the champion of the American Football League (AFL), is not only a mass spectacle followed by the American public, but that s or result has been a high correlation with the evolution of the American stock market .
Based on the known as the Super Bowl indicator, if the winner of the tournament is the winner of the NFL, the American stock market closed in positive in that year. While, on the contrary if the winner of the Super Bowl belongs to the AFL, the closing of that year would be negative.
Obviously a sequential indicator no sense, since no underlying cause and effect that encourages a link between both parameters. However, despite this, the most interesting thing is that it maintains a correlation of 82% with the Dow Jones and 76% with the S & P 500 since its result has been linked correctly after 40 of the 49 matches of the Super Bowl.
Last year, the Patriots of the AFL were the winners of the Super Bowl and the Dow Jones fell 2.23%, after six years without closing in the negative. During the last seven years the indicator has proved unbeatable. The last time the indicator lost “the ball” was in 2008 with the New York Giants NFL but the market moved downward. Click here http://carroussa.com/ to know more.