Momentum is a powerful tool in the markets.

Think it like as gasoline for the market.. you aren't going to get far on an empty tank.

So when we look at seasonality data that suggests momentum is picking up, it's worth paying attention to.

And today a very powerful seasonal indicator just fired off: the first five trading sessions of January ended green.

The Early Sessions Matter

The first five trading sessions of the year matter because they indicate where institutional demand is headed.

By the time January comes around, institutional portfolios are reset, cash has been allocated and positioning tends to reflect intent rather than cleanup (hello tax loss harvesting).

When the market is higher after the first give days, it signals early institutional demand.

Large allocators.. you know, the big guys who control the direction of the market.. don't chase strength blindly.

They scale in when they expect a theme, narrative or trend to persist for the longer term.

The early bid we're seeing tends to show up as momentum.. and it lasts.

Here's where we stand as of the close today:

All four major US market indexes are solidly in the green, lead higher by the Russell 2000 up over 4% to start the year.

Historically, this bodes well for the coming year.

History Tends To Repeat

I'm in the camp that previous performance does indicate the potential for future profits.

That's how trends work. If we find something trending higher, it's more profitable to assume that trend will continue until the weight of the evidence suggests otherwise.

And when we look at the first five trading sessions, the same holds true.

Historically, a positive first five sessions correlate with trend continuation, stronger breadth, and fewer failed breakouts as the year develops.

It doesn't guarantee upside, but it increases the odds that momentum sticks around and pullbacks are often shallow and short-lived.

Here's what that data looks like from our friends over at Bluekurtic:

Going back to 1950, when the first five trading days gained over 1%, the S&P 500 averages 15.7% over the course of the year.

More impressive though is that the average max drawdown throughout the year is only 11.4%. The corrections are shallower and generally bought up.

That's a strong track record to bet against this year.

Everybody Expects Weakness

It's a midterm year.

Everyone expects this year to be weaker than the rest.

And maybe they're right. But oftentimes people take it to the extreme.

They expect a weak year to translate into a.. bear market.

It's probably not going to happen.

The first five trading sessions is a read on participation and risk appetite from the largest banks, financial institutions and money managers in the world.

When they show up and buy stocks early, momentum has something to build on through the course of the year.

I wouldn't be so sure about this crippling midterm year if I were you..

Especially while primary trends are still up.

We're holding our Academy Live session tomorrow morning where we'll be covering everything there is to know about entering and exiting trades.

Most traders spend 90% of the time finding the perfect entry but neglect where to exit. I think that's absolutely backwards.. and I'm going to talk about it with the community tomorrow.

If you want in, the info to join us for a month is here: https://docs.google.com/document/d/1IHn3NaLaV460Qi2Ju08nZLthlxTCZcnujx8R0NeBgvQ​

Profits Over Prophets,

Hamilton

PS. We've spent this week closing trades we put on six months ago in the middle of the summer. Yesterday we closed a 3,000% win on MU and today we closed a 2,000% win on GOOG. If you're wondering if you have enough time to do this.. these trades took six months to play out and required less than 30 minutes tops to execute. Hop in and I'll show you how.