Originated by Lucien Hooper, a Forbes columnist and
Wall Street analyst in the 1970s, the December Low Indicator is based on the
Dow closing below its December closing low in the first quarter of the New
Year. DJIA’s December closing low was 47,289.33 on 12/1/2025.
See the Historical Analogue 1966 vs. 2026
in @Fiorente2's "The 60-Year Cycle in US Stock Indexes Revisited."
in @Fiorente2's "The 60-Year Cycle in US Stock Indexes Revisited."
The indicator also applies to the S&P 500, which closed
below its December closing low of 6,721.43 (set on 12/17/2025). Historically,
years when the S&P 500’s December Low Indicator was breached alongside a
down January Barometer were weaker years. When the January Barometer was
positive and the December Low was crossed, years tended to be stronger — which
is the situation we find ourselves in today.
When the market has closed below its December closing low in
the first quarter of the year, the market has dropped, on average, another
13.5% on the S&P 500 and 10.9% for the DJIA from the trigger point. Now
that the December Low Indicator has been triggered on both the DJIA and S&P
500, some caution is in order.
Why This March Trigger Is Rare
Of the 36 December Low Indicator triggers on the S&P
500, this is only the fourth to occur in March, and the sixth among the 39 DJIA
triggers. We’ve broken out the S&P DLI triggers by month in the accompanying
tables above.
It’s not surprising that most January and February triggers
were accompanied by a down January Barometer. Whereas all four March DLI
triggers — including yesterday’s — came in years when the January Barometer was
positive.
Here’s how the three trigger months compare historically:
- January triggers (24 occurrences): Average further decline of 12.92%; full year up 14 of 24 times, average gain of 1.30%
- February triggers (8 occurrences): The worst group — average further decline of 17.26%; down 6 of 8 full years, average loss of 8.13%
- March triggers (3 previous occurrences): The mildest — average further decline of 8.12%; one year up, two down, average full-year loss of 3.70%
The historical data suggests March triggers carry less
downside risk than those in January or February — a meaningful distinction
given today’s trigger.
The January Barometer Still Points Higher
When the S&P 500 January Barometer is positive — as it
was this year — the full year is up 41 of 46 years (89.1% of the time) for an
average gain of 16.95%. The next 11 months are up 87.0% of the time for an
average gain of 12.24%.
When it’s down, the year is up only 50% of the time with an
average loss of 1.75%, and the next 11 months average a paltry 2.07% gain.
Bottom Line
While the current situation suggests the market is likely to
go lower in the near term, the positive January Barometer and the broader
fundamental and macro backdrop remain supportive. When the indexes and your
spirits are down and contrary sentiment indicators reach extreme bearish levels
— a VIX above 40, Investors
Intelligence Bearish % exceeding Bullish % — that’s historically the
point at which the market turns higher again. Stay cautious in the near term, but keep the longer-term
odds in perspective.
Reference:
See also: