U.S. stocks continued their early 2009 weakness as prospects for an economic recovery in the first half of the year remain bleak. Traders continued to place bets to the downside as commodities were weak, Treasuries were strong, and the Yen continues to be the strongest currency. It appears as if the markets are setting up for a new leg in the direction of the trends that occurred from September to December.
With this in mind, traders should be very cautious in considering any new long positions in stocks at this point. The market may be due for a slight rally in the next couple of days. After that, watch for a test of the December lows, as it appears that the breakout above the December highs has failed. A break below the December lows will likely result in a new test of the November lows.
In the currency markets, all of the major currencies are within trading ranges against the Dollar. However, a little bit more consolidation should likely be followed by a new breakout to the downside for the Euro, Pound and Swiss Franc. The Yen should test its recent highs against the Dollar, but likely needs more consolidation before a new leg up can begin in earnest.
Commodity markets seem to be renewing their downtrends, lead lower once again by Crude Oil. Not one major commodity posted a worthwhile gain today and many were down sharply.
Scott Cole
www.bestdaytradingstocks.com
www.kungfutrader.com
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