Every year since 1996, around the second to third week in January, the market has a 69% chance of going down for anywhere between one and two weeks. This seasonal sell off is called the Mid-January Break. The Mid-January Break has a greater probability of curing after the first of the New Year, especially when there has been a strong fourth quarter gain. Once the New Year begins we often see a profit taking correction. Investors tend to sell stocks to lock in profits in order to defer taxes from capital gains after the New Year begins. Even though the best time to be long the overall equity markets lasts from October through late April, this January break can certainly give short term traders a nice return. The Stock Trader's Almanac notes that, since 1996, shorting the March contract on or about the second trading day of the New Year and holding for twelve trading days, it has produced gains 11 of 16 years for a success rate of 69%. The GuerillaStockTrading.com method modifies this to short the March contract around January 12th and buy-to-cover around January 19th. Because small caps have a tendency to lead the market down, shorting small caps during the Mid-January Break with 2x and 3x leveraged ETFs produce better returns than just shorting the S&P 500. You should set a 2.5% stop loss on a straight S&P 500 short, or 7.5% stop loss on a 3x leveraged ETF like TZA. You should cover the short if you get a 5% to 7% gain on a straight short S&P 500, or sell at a 10% to 15% profit with a leveraged ETF like TZA. Where traders get into trouble is that they try and cherry pick one year, to play the Mid-January Break. The probability is that it occurs 68.8% of the time. Therefore, it is better to play it every year in a row to capture the nearly 70% win probability. Playing it 10 years in a row will likely yield 7 winners and 3 losers. With a good stop loss policy and discipline, you should be able to walk away with a profit winning 70% of the time and losing 30% of the time.