In previous posts, I talked about the tendency for an early market correction in years that end in “0″ (e.g. 1990, 2000 etc.). So far this tendency has played out quite well as the Dow futures contract has dropped almost 700 points from its high on Jan 19th. If the old saying, “As January goes, so goes the year” plays out we will be looking at a down year for the markets. This is also typical for years ending in “0″ as we have seen the years 1990 and 2000 all end in negative territory.
As for this current market, the YM and ES have both formed daily market structure highs with short triggers on Monday at 9993 and 1066.25. The Weekly YM market structure high short trigger also sits at 9993 while the Monthly chart has the potential to form a market structure high this month with a potential short trigger next month.
We closed out the month of January right at the monthly 5 period moving average. We have not been below the monthly 5 period since March of 2009 so a close below this area would be another bad sign for the bulls. If the monthly 5 period holds as support and the markets can move higher off this base then the correction may be finished and the monthly market structure low (a bullish formation) should form and lead to either consolidation or new highs later in the year.
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