— "The Financial World According to Inya" Column by Inya Ivkovic, MA

January has always been thought of as a month that sets the stage for the rest of a year. That being the case, and having in mind that most of the world's indices have ended up in the red this January, the next 11 months could be brutal. If indeed we are in for a rocky ride ahead, this could be particularly painful to investors who were never quite sold on the rally of 2009 and missed the boat on truly spectacular returns.

The reason that January performance is perceived as a relatively reliable predictor for the year ahead is that it has proved accurate 48 times in the last 60 years. Of course, this also means that January was wrong 12 times in the last 60 years, including last year, when, after a dismal January, the market reversed course and rallied to new highs in the second half. We may take this to academic levels and discuss seasonal effects in terms of probabilities or playing the odds, but that is not what worries many money managers about this particular January.

I have never labeled the market rally of 2009 as a recovery rally, but rather as a typical bear market rally, which appears to have peaked and could be right now in the middle of a major pullback, if not a distinct turn for the worse. There seems to be plenty of evidence supporting the bear rally peak, such as weak and uneven rallies on light volume and, even as the selling momentum loses steam, no buyers are entering the field to push the uptrend further.

How low could we go this time? Some technical analysts are calling for hitting the lows from March of 2009. In percentage terms, if we really dial the clock back to March of last year, we could see equities nosedive to 50% to 60% from current levels.

If stocks take a beating, they are not going to be the only ones. Other asset classes could also take a hit, particularly those that have gained significant ground, such as gold and many base metals. However, since we perceive gold's secular trend as a bullish one, we are not worried about any short-term pullbacks. As far as gold is concerned, we are into this asset for the long term.

But where do I stand on equities, other commodities and currencies? I'm with the pessimists on this one. Although March of 2009 saw considerable value discounts in many asset classes, they were actually not the extreme discounts that typically occur when a bear market bottoms out. A clear sign that a bear market has hit its absolute bottom is when people say, "I've had enough, I'll never invest a dime again." That clearly did not happen after March 2009, because many investors returned to the market in the second half with a vengeance, bent on gaining back as much as possible, while most securities were still undervalued.

Much of this is based on technical analysis, which often falls off the radar during the good times and comes back into focus when the times get tough again. At the moment, technical indicators are painting a grim picture with broken down short waves, not even developing into phases, yet repeating over and over on the least amount of steam available. The reason for this is simple — the debt chaos has not been addressed and it may take years for it all to unravel.

In practical terms, the market appears to be running on fumes and that cannot last for very much longer, so yes, I think January 2010 is correctly predicting a difficult year ahead for most asset classes. Just don't equate my being pessimistic with staying out of the market. Remember, money can be made in any market, as long as you understand which way it is going.