"Thank you for your detailed comments on 7 January.

"I totally agree with you that break of 1340 in S&P will be the key signal, unless of course it establishes a higher low on the next reaction, which is possible.

"Another interesting observation I would like to share with you and the readers is that during the topping formation in the years 2000 and 2007, the year ending close for S&P was 1469 and 1468 respectively, which is about where we are today. Hence if history was to repeat itself, even if S&P was to go over 1500 (not unlikely) during 2013 in the current cyclical bull run, it may end the year relatively flat, perhaps confirming the topping pattern and the commencement of a cyclical bear during 2014!

"If nothing else, amidst all the euphoria, caution may perhaps be warranted during the year! As regards potential triggers on the horizon, apart from the ones mentioned in my previous e-mail, commented upon on 7 January, the only other issue I can think of is the unresolved Iran (nuclear) issue, where the time for a resolution is drawing near, with each passing month! Then again, very few of us foresaw the U.S. housing crisis, till it was upon us.

"Structured bears, as the one we are in now, normally last for 13-16 years and given that the current bear commenced in 2000, it is quite likely that the next sizable correction, if it were to play out during 2014 (15th year), may give us a golden opportunity to load up for what may possible be the beginning of a long structured equity bull market, with money moving out of bonds into equity, for obvious reasons.

"Just some loud thinking, that's all - none of this may come to pass!"

David Fuller's view Thank you for your interesting assessment.

Regarding 1340, here is my recent reference to it, stated on 4th Jan and repeated for emphasis on the 7th:

A close under 1400 would be a warning and a break beneath 1340 would end the consistency of higher reaction lows and confirm that resistance had been encountered from the 2007 highs.

Therefore I am not forecasting that the S&P 500 Index will break its low of 1340 because we have yet to see any of the downward dynamics that confirm selling pressure. Instead, the S&P is still in a cyclical bull trend, but we do know that it is technically overbought in the short term. Additionally, it is at the upper side of a broad trading range which will offer some resistance, given the two significant bear markets which occurred from these levels, commencing in 2000 and 2008.

However, even if the low at 1340 was broken by another setback in the next few months, I think it would amount to little more than a correction, or at most, a shallow statistical bear trend which most people would define as a setback of over 20%, similar to what we saw in mid-2011.

I say this because few of the fears aired by market commentators following 2008 have occurred. The most dramatic of these, fortunately never part of Fullermoney's predictions, ranged from 'the collapse of the euro' to 'a depression in the USA'. Some pundits also predicted 'a collapse of China's economy'. There are certainly dire aspects to Europe's problems, primarily involving the Southern European countries, but the region's financial indicators have improved considerably.

You can see how much they have improved, shortly after the extreme levels for Europe shown in my PowerPoint presentation for the 49th Annual Contrary Opinion Forum on 6th October 2011. If subscribers compare Europe's indicators at that time with what you will find in the Fullermoney Chart Library today, you will see a considerable difference.

Also, look at the second slide which shows the current 'Secular valuation contraction', in comparison to a similar period from 1966 to 1982. The circumstances were certainly different but the technical patterns have been similar, with both valuation contraction cycles preceded by secular bull markets, partially shown in the first instance.

The next known big risk for markets, in my opinion, particularly in the west, will be the end of QE signalled by the Fed. I do not know this for sure, of course, because we cannot know how that exit will be handled. However, what we do know is that QE has been a massive tailwind for markets. The Fed probably does not yet know the date when it will signal an end to QE, although it cited an unemployment target of 6.5%, but I am sure that Mr Bernanke and colleagues have been thinking about the manner of their eventual exit strategy. What we do know is that it is most likely to be triggered by good economic news, which should lift markets before QE ends.

Subscribers can also prepare their strategies for an end of QE in the USA. Some out-of-the-money put options for long-dated US Treasuries would be a candidate for traders, but it may pay to wait until a downward trend is established by this Total Return graph (historic & weekly) which I would describe as at least one lower high, followed by a lower low than we have seen on the weekly chart to date. Otherwise, the expiry date for a put could be a problem.

A strategy investors may wish to consider, would be to shift more of portfolio weightings away from the USA and into Asia, where China and Japan are currently at the top of my list.