The good news is:
 • Seasonally the last half of January is strong. The Russell 2000(R2K) has been up the last 10 trading days of January 12 out of the last 15 years.The NASDAQ composite (OTC) and the S&P 500 (SPX) have each been up 10 outof the last 15 years.

The chart below shows the OTC in red, a 4% trend (55 day EMA) of NASDAQ upside volume (UV) in green and a 4% trend of NASDAQ downside volume (DV) on an inverted Y axis in brown. The Y axis for DV is inverted so that decreasing DV moves the indicator upward (up is good etc). It is a little early to tell, but a bottom could be forming in DV. It is interesting to note in the recent sell off DV hit a lower low than it did at the bottom last August.

The next chart shows the R2K and the same indicators calculated from just the component issues of the R2K. The bottom on this chart is a little more convincing because DV began heading upward a few days before the low in prices last Thursday.

There is a reasonably good signal system based on NASDAQ total volume. It uses momentum of total NASDAQ volume and generates a buy when total volume is rising and a sell when total volume is falling. The chart below shows the R2K in red and momentum of NASDAQ volume in green when the system is on a buy and red when the system is on a sell. The dashed horizontal lines are the trigger points. When the indicator rises from below to above one of the horizontal green lines a buy is generated and when it falls from above to below one of the horizontal red lines a sell is generated. The system has remained on a buy since early October.

Volume indicators move ahead of most other indicators, but generate a lot of false signals.

Signals from new highs and new lows are slower, but give fewer false signals.

The chart below shows the R2K and an indicator of new lows calculated from the component issues of the R2K. For this indicator new lows have been calculated over the trailing 6 weeks rather than 52 weeks as reported by the exchanges so the indicator has been speeded up somewhat. Like DV in the charts above the Y axis has been inverted so increasing new lows move the indicator downward. 6 week new lows dropped from 28% of total issues in the index on Thursday to 7% on Friday turning the indicator sharply upward.

We look for evidence of a bottom shortly after the event. One day is very short, but there is a good chance Thursday's low will be the low for the next several weeks.

I expect the major indices to be higher on Friday January 21 than they were on Friday January 14.

The major indices were mixed last week, most of them less than 0.5% from the week before so I am calling last weeks positive forecast a tie.