Yeah, the market's getting bombed today. It's down about 1.0% at the time I'm writing this. I gotta' be honest with you though - I'm not really sweating anything that happens this week, good or bad. If there was any volume behind the moves from today or Friday [today's losses are about as big as Friday's gains], I might tell you to worry. This is one of those weeks though, where the lack of volume just lets stocks drift like dust in the wind. In fact, I'm pretty sure I saw a tumbleweed blow across Wall Street earlier today. That's not to say there are no good uses of our time this week, however. We just need to use it in ways other than worrying about where the market's going, ya know? One of the ideas I'm sure you've been hearing about as the year comes to a close and the new one is on the verge of arriving is the so-called January Effect... at least one of them anyway. (That's right, there are three, though two are related.) Before betting the farm on any or all of these theories, I wanted to share some of my research with you to dispel the truth from the crap for each one. So, here we go, but with a warning - don't start spouting off these factoids at whatever New Year's Eve party you attend. You may be right, but it's definitely not "life of the party" stuff. January Effect #1: Small caps and the prior year's biggest losers outperform large caps and the prior year's biggest winners in January. THIS IS TRUE, even if a little obvious. Some of the research shows that small caps outperform large caps by 2.5% points in January. Other research shows that small caps outperform large caps 76% of the time in January. The outperformance has been even bigger since 2008. Point being, this is one is historically worth a bet; go shopping for beaten up (but high quality) small caps. January Effect #2: As goes January, so goes the year. THIS ONE IS ALSO TRUE. It's a bit misleading, but true all the same. The historical numbers are actually quite impressive. Since 1945, 85% of the time we saw a gain in January, we also saw the market post positive results for the whole year. Solid. Of course, the criticism stems from the reality that the market is supposed to go up - to correlate a bullish January with a bullish year isn't really a stretch. Fair enough. However, the correlation between bearish Januarys and bearish years is also very impressive.... almost as predictive as the bullish correlation. So, yeah - it will be worth noting whether or not the coming month was a good one or a bad one, at least when considering your long-term holdings. January Effect #3: The first five trading days of the year determine that entire year's success for the market. In other words, if the first five days are net-bullish, then so too will be the year. If the first five days are bearish, then so too will be the year. THIS IS FALSE, Well, it's sorta' false anyway. The research shows if the first five days are winners overall, then there's a 69% chance that the market will post a gain for the whole year. Those aren't bad odds. There's a catch though. In years where the first five days of the trading year were net losers, there was still a 65% chance the market would be positive for that year. The different between 65% and 69% isn't statistically significant enough to bet real money on. So, there you go - more information about the January Effect theories than you ever asked for. Like I said above, do NOT use this information to try and impress that good-looking guy or gal at any holiday parties. You'll just get the blank stare. Trust me on this one. Now, about some individual stocks we've been watching... VirnetX Heads South When I told you yesterday that VirnetX Holdings (VHC) was ready to take a break after a heroic runup, I wasn't kidding. Well, it has, and I'm glad. Like I said on Tuesday, the 13.3% move above a major ceiling was a big blow against the bears, but a little unsustainable. Sure enough, VHC has fallen back from $28.01 then (after reaching a high of $29.45 that day) to the current price of $25.42. It's scary on the surface, but remember - the bulk of the hard work has been done... the move above $23.90. All this stuff over the past three days is just post-surge-volatility. Let's give it a few days to settle in. I still have a feeling it's going to resume the uptrend once everyone has a chance to catch their breath, making this dip an entry opportunity for any interested newcomers. AtheroNova Tension Building Also, though there's no company news to report, I wanted to give you a chart update on AtheroNova (AHRO). It's the same story as before - this stock is getting squeezed into an ever-tightening wedge that sooner or later will force shares out of it... with a vengeance. Not too many things build up steam for this long without making an explosive move once unleashed. So which direction will this one be flung? My expectation is still for an upward move. AtheroNova has never been closer to a marketable product, and the preliminary results look very promising. And as it turns out, the timeframe here isn't nearly as lengthy as it is for most biotech developments. AHRO could be wrapping up Phase I trials of AHRO-001 (the lead drug candidate) in the middle of 2012, and starting Phase II shortly after that... a real milestone. You guys know how it works though - biotech stocks trade six to twelve months into the future. To play that future potential of this one, you gotta own it before then. Just sayin'.