First of all I wish everyone a happy new year the 2013 !

I will be making my 2013 predictions shortly and come up with a list of what I think/believe mkts/economy will do this year.

But lets take a look at the markets.

Overall mkts has been slowly going down since we reached 1450 area ,, but I dont think it has been a bad move ,, just a healthy pullback in my oppinion. The price/action does not suggest that this is the start of a big new sell off + we need to get some bearish divergences on daily charts before we have a real top imo.

So more than likely I think we will break above 1450 in the coming week possible and THEN form a top with a bearish divergence in place.

The euro and dollar still suggest that euro should see more upside with dollar going down further IMO ,, this is good for further upside in mkts as the euro will push higher.

VIX hit its WEEKLY MA200 and is pretty much overbought on daily – suggestion AT LEAST A REBOUND/RALLY coming either way.

As you know I said in November that we could see a weekly rally going into new year with a target of 1440-1450 which we actually HIT perfect. So we MIGHT have topped out – I wont rule out we topped out , but everything I see suggest we get at least a final pop higher in markets.

Also the small caps (RUT) is a lot stronger than indexes , and if this was a real sell off starting then small caps should be hit much harder imo !

Conclusion: I would not be surprised that they fix a mini deal and mkts starts a big rally – I believe we could test the highs of 2012 , but on the other hand I would not be surprised to see a rebound before we head lower again.

The next “BOUNCE/RALLY” will be telling if rally is done or not,, if mkts cant soon have a MAJOR rally and upside ,, then I think odds are more likely that we are topping out – but if mkts soon starts explode higher – then I think we take out 1450 and test 2012 and possible go even into 1500s….

Pretty critical time ahead here imo.