A theory stating that the performance of the S&P 500 in January predicts its performance for the remainder of the year. That it, if the S&P ends January higher than it began, there will be a rising stock market and vice versa. Investors using the January barometer make investment decisions based on this performance; they buy S&P 500 stocks when performance is strong in January and sell when it is not. The January barometer has had mixed results over the years.
The tendency of stock market movement in January to set the market trend for the entire year. Thus, if a market average is higher at the end of January than it is at the beginning of January, chances are that the year will produce a rising market.