With the McClellan Oscillator, although the reading is now at an extreme high, it will be the character of the decline from the extreme that will tell us if we are going to get a sideways consolidation or a serious decline for the first month of the new year.
The Bullish Percent is running in neutral, although the SP is at a high reading in its channel. IF the indicators turn lower and break down then we will see a correction lower, and perhaps a major decline.
There is an abnormally large amount of money hiding in Treasuries. If this starts coming out of the safe havens and into stocks we may see follow through. Keep an eye on the yield curve, especially the longer end.
Corporate profit forecasts have not fully discounted the severity of the recession. On the bullish side, the Fed is pouring money into the economy, as noted in the Adjusted Monetary Base.
If they do manage to trigger a sustained rally it may be sharp. There was a significant rally after the Crash of 1929. However, we don't expect this until later in the first quarter, and it will be met with waves of selling and a new low unless the Fed can do something truly exceptional.
We like ot use the January Indicator if its a down month, because the correlation to a predictable result is higher.
"It is rather for us to be here dedicated to the great task remaining before us — that from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion — that we here highly resolve that these dead shall not have died in vain, that this nation under God shall have a new birth of freedom, and that government of the people, by the people, for the people shall not perish from the earth.” Abraham Lincoln, November 19, 1863