Last Friday one of the most visible (if not most reliable) technical analysts - Tom De Mark, who works with Bloomberg- made the call that today (Monday) would be down, after the huge rally we've had so far in 2013. This exceeds his call of SPX 1484 made by his people at the Bloomie meeting last Fall that I attended in San Francisco.
Hopefully the January Barometer will hold true, rather than the Super Bowl Indicator of the AFC winning predicts a down year. Although the latter is based on pure random coincidence, the saying "So goes January - so goes the year" is probably explainable by ( I believe it's Heisenberg's Uncertainty Principle), that since an "up" January is contained in the whole year, it helps the odds!
Another factoid fond in the valuable Trader's Almanac is that, on average, the market gains more in the first day of the month than in the rest of the days combined - due to paydays, bonuses, etc. So we wouldn't expect last Friday to be a corrective loser, after such a runup. How far and fast the decline is unknowable, but for weeks the Sentiment Indicators in the blog:
www.mktsentiment.blogspot.com. have been screaming for a correction: my cumulative advance/decline numbers have been setting new highs for weeks - a breadth/strength indicator; new highs/lows have been drastically one-sided. Complacency is rampant in the NY to NASD Volume, sentiment newsletters (Bull/Bear), the VIX Fear Index, and Bullish %. Margin interest at $350B is at a danger level.
Indicators with receding levels, coming off extremes, include Equity mutual fund inflows, MMFund outllows, the McClellan Oscillator (although the Summation creeps up high, yet CEO Insider Selling rises exponentially.
Since the McClellan Oscillator is one of the most reliable Indicator that I track, I did a study on the past 3 years readings:
Of 34 times that the adjusted (for fixed income-type stocks) reading reached + or - 50, there were 9 misfires. Not exceptional, but for the fact that each of these were at the start of a huge rally ( including 3 at the liftoff of the March'09 cyclical Bull market. Others were March '10; Oct. '11. The last one was Jan.4, 2013!!!