Stock traders might like to believe markets rise and fall based on logic and cold facts, but deep down they know the truth is far more complicated. Emotions, a snippet of news about the economy and myriad other factors can send prices plummeting or rocketing skyward.
While some emotions are driven by the news and other information that has some factual basis, there are some "indicators" followed that are best called omens, or maybe superstitions. These are based on some observed phenomena seen as causing the markets to move.
A well-known example is trotted out every year as the Super Bowl nears. It holds that if the team from the National Football Conference wins the market will rise and vice-versa. There's no reason this should be true, of course, but the statistics are trotted out each year.
And lest you think the upcoming presidential election has some predictive value, the data shows that whether the Republicans or Democrats win likely has no affect on the price of stocks.
There may not be anything substantive to stock market omens, but they are fun to think about. Here are AdvisorOne's 8 Stock Market Omens That Influence Investors:
1. The Skyscraper Curse
This one goes back to 1931. It holds that when a country builds the word's tallest building its stock market will soon tank. The first case cited is the building of the Empire State Building. After that, according to Bloomberg.com, new buildings in Chicago in 1974 and Kuala Lumpur in the 1990s led to a drop in stock prices.
Now, South Korea is apparently tempting fate with the the Lotte Super Tower 123 in Seoul, set to measure 1,821 ft. when it is completed in 2014, becoming the world's fourth-tallest building. Perhaps the downturns coincide with business cycles. An economic boom allows the planning of such grand edifices, but by the time they are complete a downturn is on the way.
2. The Super Bowl Indicator
As mentioned above, the stock market seems to rise or fall each year based on which NFL conference produces the winner of the championship. According to Snopes.com, the indicator has worked in 33 out of the 41 years since the first Super Bowl. As the site, which looks into urban legends, points out, just because there is correlation between the game's outcome and the stock market, doesn't mean one causes the other.
3. The Hemline Index
This canard holds that when women's skirts are short the economy is rolling along, and when those hemlines drop times are bad. Megan Barnett of BusinessInsider.com looked at what's behind the Hemline Index. She noted that the first mention of the idea came from the flappers of the 1920s. When the miniskirt became popular the 1960s, the stock market boomed. Still, she points out, women's fashions are determined long before they hit the stores by fashion designers who are not likely to include economic predictions as part of their creative process.
5. The Death Cross
6. The Golden Cross
7. The Hindenburg Omen
8. The Presidential Election Effect
