The theory is that if there is snow in Boston on Christmas day then the price of stocks will go up for the coming new year.

Hmm.. I’m not sure just how valid this economic indicator is, But I don’t think that I will place much faith in the Boston Snow Indicator this (or any) year!

Unfortunately, I have had a good look around on the internet and there does not seem to be much evidence to support the accuracy of the Boston Snow Indicator.

I took a look at the weather reports for 1999, and it seems that Boston did not have any snow on Christmas day. This would support the major drop in the markets for 2000. So maybe there is some truth in the Boston Snow Indicator.

However, there was 0.3 inches of snow on Christmas day in 1995. In the next year, the S&P500 gained about 30%

But I also noticed that the record snowfall for Christmas in Boston was in 2002. The S&P500 continued to plummet in the following year!

So there you go. I would advise taking the forecast of the Boston Snow Indicator with a pinch of salt and a good dose of skepticism.

Incidentally, I was not sure whether to file this under Technical Analysis or Fundamental Analysis, so I put it in both.

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Technical Analysis is a method of analyzing the price of a financial instrument by studying its Stock Chart. Here, analysts look to find patterns in the Historical Price Chart which serve as indicators for the future action of the instruments price. Often, Technical Analysts will also apply Technical Indicators to the price chart. These indicators can serve to provide a level of statistical probability as to which direction the price will go in the future. Examples of Technical Indicators are Moving Averages (which shows the average value of price over a given time), Trend Lines (a straight line that connects two or more price points), and Stochastics (an oscillator that measures the position of an instrument relative to its trading range).

Fundamental Analysis is a method of analyzing the financial instrument by studying the the intrinsic value of that instrument. One of the most import aspects of Fundamental Analysis is the studying of a companies Balance Sheet. This points to a more sedatory approach than that of Technical Analysis as aspects such as crowd behaviour and price action are dismissed in favour of disecting such things as the companies Assets and Liabilities in order to assess its value.

However, it is important to understand that you do not have to commit yourself to an individual school of Technical Analysis. Technicians often look to the fundamentals of a stock to reinforce their technical belief – and likewise – Fundamentalists will check the price action of a stock to reinforce their research.

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