technical analysis: the Super Bowl indicator

what it is

It’s a joke   …literally.

The Super Bowl indicator was invented during the 1980s by Robert Stovall, then a prominent Wall Street investment strategist.  He wanted to satirize technical analysts and mathematical economists, both of whom were trying to find simple–but infallible–leading indicators of future stock market performance,  and the customers who were willing to believe whatever these gurus told them.

What could be more preposterous, he thought, than claiming that the results of a football game were the key to stock market performance during that year?  Not much.  So that’s what he decided to assert.

the Super bowl indicator has two rules

The Super Bowl is, of course, the contest for the overall NFL championship between the winners of the National Conference (NFC) and American Conference (AFC) titles.  Stovall’s first Super Bowl rule is:

–the stock market makes gains for any calendar year in which the NFC team wins; it makes losses when the AFC team is the victor.

The only problem with this rule is that it didn’t fit the facts when it was promulgated.  The Pittsburgh Steelers of the AFC won the Super Bowl in 1974, 1975, 1978 and 1979.  The S&P had gains during last three of these years.

This prompted Stovall to add a nuance, through a second rule:

–the Baltimore (now Indianapolis) Colts, Cleveland Browns, and Pittsburgh Steelers all count as NFC teams, even though they are in the AFC.

Why is that?  It’s obvious   …to explain away 1975, 1978 and 1979.

Stovall’s rationale?    The present NFL is the product of the 1966 merger of the larger “old” NFL and its smaller rival, the American Football League.  The “old” NFL became the NFC; the AFL became the AFC.  But the AFC was smaller.  To make the two conferences equal in size, three “old” NFC teams–the Colts, the Browns and the Steelers–were transferred into the AFC in 1970.  What counts, Stovall said, is where the teams started out, not where they’re playing now.  That got him the results he needed.

(Another effect of this tweak is to classify 60%/40% in favor of “up-market” teams, bringing the league composition more in line with the rhythms of the inventory cycle–and consequently with the percentage of time Wall Street typically spends rising or falling.  I’m pretty sure Stovall didn’t care.)

my thoughts

Two things strike me as strange about the “indicator.”

First, 80% of the time the Super Bowl and Wall Street have been in alignment.

The second is that Wall Street appears to have lost its sense of humor where football is concerned.  No one seems to remember that this is a spoof of technical analysis and mathematical economics, not a serious tool.  Google “Super Bowl indicator” and see for yourself.

I know professional investors are deeply superstitious, but really…  This is almost as bad as investing based on the winner of the Emperor’s annual poetry contest (another weird story).


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