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Down January, Tough Year!

It appears, baring a last minute and mighty rally, that we will finish the month of January in the red. History tells us that "as January goes, so goes the rest of the year." Which isn't giving me any warm and fuzzy feelingsā€¦.I don't know about you?

According to the Trader's Almanac, the January Barometer has a 88.9% accuracy ratio since 1950. This indicator has had only seven errors over that time including the impact of the Vietnam war in 1966 and 1968.

CNBC.com tells us that "The January barometer has been right in 62 of the last 85 years, or 73 percent of the time. Since 1929, the index followed January's direction 80 percent of the time when it finished positive, and 60 percent of the time, when it finished negative."

More recently, in the past 35 years, the S&P 500 followed January's direction 25 times, or 71 percent of the time (83 percent of the time for the Dow, and 74 percent of the time for the Nasdaq, again according to CNBC.com.

So we know several things from this: 1) this indicator is pretty accurate and investing is a game of odds, so it would be wise to heed this barometer; 2) we also know that every down January on the S&P 500 since 1950, without exception, proceeded a new or extended bear market, a flat market or a 10% correction.

So the bottom line is this is serious. We are starting to get trend following sell signals on many indexes with more likely today as we near the close of trading. The only question we have to settle is is this the start of something bigger, something volatile and flat or just a 10% correction? So far, my vote is just the latter.