I'm writing this Saturday morning. The FOX Bulls and Bears show came on at 10:00 AM. I was flipping through the channels and stopped by it. I was curious to see what the FOX talking heads would have to say about the market. Friday was a critical day as not only did the Nasdaq fall 98 points to close below its November low, but the advance/line for the S&P 500 totally broke down. I thought I would get some analysis from the FOX talking heads. But I got nothing of the sort.

Instead they blamed Friday's market drop on the election results in Iowa. FOX executives seem to hate Obama and Huckabee so they blamed the drop on them, claiming that both will enact soak the rich policies that will ruin the economy. It's typical FOX as they use any event to spread propaganda and talking points and when it comes to the election that means slamming all candidates except Rudy Giuliani(Fox News President Roger Ailes was a Giuliani media consult during one of his mayoral races). I should have known better than to think I'd get a moments of analysis from anything on FOX. FOX news watchers are the most uninformed people on the planet. It is lemmings who follow their advice in the financial markets that enable us to make money. After three minutes I cut the TV off and went to my computer and opened up the charts.

The first few days of this year have begun with a bang. Gold stocks came out of the door and exploded to a new 52-week high while the broad market came unglued and broke several key technical indicators and support levels on Friday. Usually what happens in January is key to the rest of the year. Since 1962, 72% of the time when January has been an up month the market finished the year ahead and when the market dropped it ended the year down. January seems to be the most important month of the year for the market.

The way the market is setup more than ever what happens this month is likely to determine what happens the rest of the year. I believe in the months ahead we are going to see the bull market in commodities continue and the broad market continue to weaken. Gold and gold stocks rallied so much last week that they are now overbought on a daily chart. They are likely to consolidate or pullback at this point before they go higher. But any pause in them that comes over the next few weeks will just be another buying opportunity. I'll focus on that a lot once the next entry point in them materializes.

For now though we need to pay close attention to the broad market. The action last week should not have come to you as a surprise. In several WSW members only reports in the past six weeks I have detailed several key danger signs that warned the market would likely go lower. Two of the most important were the falling advance/decline line and the growing bullish sentiment in December in the face of deteriorating market internals and an overall bearish price chart pattern for the broad market indices.

In my December 3, WSW Power Picks monthly newsletter, I stated that if the S&P 500 did not finish the year above its 150-day moving average, which was around 1500, then it would be telling us that it was in a bear market. At the end of December the market bounced up to this level, but met resistance, and in the first days of this year the market has already broken down. This is a bear market folks.

I think my December issue is one of the most important things I wrote last year. It explains clearly all of the signs that show that the market is in a bear market. I think you can learn a lot by reading it. I believe it is so important for you to do this that I have created a special condensed version for non-members to read. You need to understand the warning signs that led us to know the market was likely to break down. I have cut out members only information from it, such as the stock picks. It is in .pdf format. You can access it by clicking here.

Although the market is now oversold on a short-term basis, and could bounce this week, I see it going much lower this month before putting in a real bottom. I think the S&P 500 is going to bottom in the 1320-1360 area within the next 6 weeks. It should then put on a powerful counter trend rally back up to its 150-day moving average, which will be in the 1450-1490 area, in the February-April time frame. That means the next few weeks are going to be very critical times for the market. We'll be watching, writing, and talking about it in our articles and podcasts on a daily basis over the next few weeks. A market correction will provide an excellent entry point to make money on the long-side, and in precious metals in particular. Come back everyday to WallStreetWindow.com see what we have to say.