Part of stock market lore is that January is the key to the year ahead – break the boundary of the January high or low and you have a forecast of the direction for the year.

  • If that adage has any validity, get ready for a down year in stocks as E-mini S&P 500 Index futures blasted through the lower boundary for January (lower red dashed line) by falling about 35 points Tuesday (and nearly 300 points in the Dow).
  • If the $787 billion economic stimulus bill that President Obama signed Tuesday is supposed to solve the nation’s financial ills, the stock market wasn’t impressed (nor were a number of other markets).
  • VantagePoint made a medium-term moving average crossover to the downside and the predicted neural index reading dropped to 0.00 several days ago, bearish clues. Any trader taking a short position on the predicted moving average (blue line) falling below the actual moving average (black line) was in a good position to profit from Tuesday’s slide.
  • Next up: The November low at 739 (black dashed line). Will the market bounce back up from it, forming a double bottom? Or will the market break through that low, opening the door to significantly lower prices that many expect? VantagePoint indicators should provide an early alert as to how this test will be resolved.

Source: VantagePoint Intermarket Analysis Software

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