View Full Version : SuperBowl Stock Indicator: 79% Probability Of A Good Year

02-07-2010, 10:59 AM
However, I wouldn't bet the farm on it.. or even 79% of the farm - literally.



Their cheerful demeanor might also be traceable to the happy turn of events that guarantees that the venerable Super Bowl Indicator will flash a bullish signal on Sunday -- regardless of whether the New Orleans Saints or the Indianapolis Colts win.

The Super Bowl Indicator, as many market followers know, holds that stocks will rise over the coming year if the winning team can trace its roots back to the original National Football League -- and fall if that team's roots are in the old American Football League.

Followers claim that the Indicator has a 79% success rate, far better than most other popular stock market timing systems.

The reason that this Indicator will flash a buy signal on Sunday, regardless of which team wins, is that both of them trace their roots back to the original NFL.

Before you rush out to throw more money into the stock market, note that this year is not the first in which the market was supposed to go up regardless of which team won the Super Bowl. The same situation existed in 2001, when the Super Bowl was played between the New York Giants and the Baltimore Ravens.

The stock market fell 11% that year, as judged by the Wilshire 5000 index.
Nor does a bullish signal from the Super Bowl Indicator provide any protection from a bear market. Remember the Super Bowl two years ago, when the New York Giants pulled off an upset victory in the final minute of play? The stock market over the subsequent year dropped some 40%.

To be sure, the Super Bowl Indicator has had many successes, too.
This last year is counted as one of them, at least by many of the Indicator's devotees. Even though last year's Super Bowl was won by a team from the original AFL (the Pittsburgh Steelers), followers have for years made an exception to the Indicator's rules, deeming it to be bullish if the Pittsburgh Steelers won. (No doubt, this exception was made because Pittsburgh has won so many Super Bowls over the years; without the exception, the Super Bowl indicator's track record is a lot more mediocre.)

And, as we all know, 2009 turned out to be a very good year for the stock market.

The real Achilles' heel of the Super Bowl Indicator, at least from a statistical point of view, is that all it has going for it is a 79% success rate. And while you might think that this is good enough to bet on it, you're wrong: Many phenomena that have absolutely nothing to do with each other are nevertheless highly correlated statistically.