Line up, place your bets

San Francisco 49ers quarterback Colin Kaepernick / Streeter Lecka/Getty Images

(MoneyWatch) Call your broker, go online, but however you do it, buy stocks today! Why? Because two of the most famous predictors of stock market performance both point toward buying stocks now.

Super Bowl indicator

One of the best known market indicators is that stocks skyrocket if the Super Bowl winner was once part of the old National Football League. Even though the big game isn't until February 3, I'm going to go out on a limb and predict this will happen. That's because both the Baltimore Ravens and San Francisco 49ers were members of the old National Football League.

According to Snopes.com, the indicator has correctly predicted the stock market about 80% of the time. That's a pretty good track record and I admit I'd increase my allocation to stocks if I knew the market had an 80% chance for an up year. But I want more!

• 3 financial predictions for 2013
• January crystal ball
• Saints victory assures up year?

January Barometer

Stock market forecasters on Wall Street place a great deal of emphasis on stock performance in the month of January, as it is perceived as setting the pace for stock performance for the rest of the year.

So if stocks surge in the month of January, it apparently increases the odds that the market will be up at the end of the year. This phenomenon is termed the January Barometer by Stock Trader's Almanac, and sports a pretty impressive accuracy rate of almost 90%. 

While January isn't over yet, the odds of a favorable barometric reading are pretty darn good. The S&P 500 index is up 4.8% through January 24.

If I put both of these so-called powerful predictors together, the math indicates that there is only a 2 percent chance of a declining stock market in 2013. That translates to a 98 percent probability of an up stock market. You've got to like those odds!  

Back to reality

Before jumping into stocks, however, let's go over a little lesson on statistics. If you compare stock market performance to a thousand random events, such as temperature, traffic, Super Bowl outcomes, or January barometers, you are likely to find one series of events that has a 99.9% probability of past correlation. Unfortunately, these correlations end up having zero predictive power.

This human addiction to prediction causes us to do what is called "data mining." It's a behavioral trait that drives us to find patterns out of randomness. And armed with these patterns, we are able to go forward and brilliantly predict . . . the past.

As silly as it seems that we would grasp at predictive straws like the Super Bowl outcome predicting the stock market, or use one month of returns to predict the rest of the year, I would argue that it's no sillier than the gurus on TV using their sophisticated analysis to pick stocks or predict stock market directions. They're all myths that investors shouldn't buy into.

Keep in mind that the highest, and most obscure, correlation to the U.S. stock market ever found was "Butter Production in Bangladesh." The only bull I'm willing to bet on is that these indicators are just that - bull!

[pburns_stat]

The 80% success rate seems to be inflated. There are a couple tricks. Some people have used bizarre definitions of "the market" to make the results look better. Another issue is the definition of "National" versus "American". The data that I have has 29 successes out of 46 or about 63%. See http://www.portfolioprobe.com/2012/02/06/the-us-market-will-absolutely-positively-definitely-go-up-in-2012/

[jroc2013]

Nice column, Allan. Always enjoy your stuff. Your logic for this year's game is based on a false premise: the Baltimore Ravens were not a member of the pre-merger NFL. To placate jilted Cleveland Browns fans (from whence the Ravens "moved" after the 1995 season), the NFL deemed the Ravens to be an expansion franchise and all Browns "history" would belong to the "new" Cleveland Browns that would eventually enter the NFL in 1999. For the sake of the DJ, let's all root for the 49ers (who entered the NFL the same year as the orignal Cleveland Browns when the AAFC folded after the 1949 season).

Yes, sadly, I am a Browns fan.

[JerryNA100]

Why no, dear, I wasn't looking at that woman's legs. I was looking at her hemline, because hemline lengths correlate with the rise and fall of stocks. I was just selflessly looking out for our financial future.
(No, I'm pretty sure that my wife wouldn't believe it either.)

[Allan_Roth]

You mean the hemline indicator doesn't work either?

I've found the December barometer to be accurate. If the market is up through the month of December, it seems to always finish up.

[JerryNA100]

AR: "You mean the hemline indicator doesn't work either?"

Not for getting me out of trouble.

Oh, you meant for *predicting* *stocks*! I don't know, I just dollar cost average and re-balance.