This week is all about the unemployment data in the US. The data we have seen over the last week in the US has not been good with weak durable goods orders and housing data. Today saw the publication of the Conference Board consumer confidence data for September which fell to 53.1 from the August level of 54.5. Cracks are certainly starting to appear and this makes the unemployment data that much more important this week. We start on Wednesday with the ADP private payroll data which is expected to show a decline in payrolls of around -200,000 over the month and the Non Farm Payrolls due on Friday are, according to the consensus, expected to show a fall of -180,000 in payrolls with the unemployment rate expected to tick up to 9.8% from 9.7%. Anything materially different this month could lead sentiment to shift back to a negative bias providing the possibility of a sell-off. At the moment the market is taking the negative data we have seen in its stride, but this may change if the flow continues to disappoint.

Also look out for the US ISM manufacturing data for September which is due to be announced on Thursday. The last figure was 52.9 and is expected to move further ahead to 53.5 according to the consensus.

The US Durable goods orders for August have brought home just how fragile any US economic recovery may be. The -2.4% decline was considerably worse than expectations of a 1% improvement over the month. Excluding the transportation component the news was not quite so bad with no orders over the month. The primary reason for the decline in the headline number was a 42% drop in commercial aircraft orders although it has to be borne in mind this sector can be very volatile. What is more worrying especially when it comes to estimates for Q3 GDP was the fact that inventories of manufactured durable goods fell 1.3% in August following on from a 1.1% decrease in July. The argument that inventory replacement will be a strong contributory factor to GDP growth during Q3 is looking increasingly weak. Non defence new orders for capital goods in August also fell over the month which is not a good sign that business investment is responding to recovery. Overall a disappointing set of data following on from poor existing home sales data the day before and poor new home sales data on the same day. If it was not for a stronger than expected University of Michigan Consumer Sentiment figure announced on Friday we may well have seen the US market retreating sharply. Market sentiment is likely to remain weak over the coming trading week.

I wonder if we are now seeing the catalysts for a marked shift in sentiment back towards a negative bias. The US durable goods orders came in today at a disappointing -2.4% month on month compared to the consensus expectation of +0.4%. This follows hot on the heals of yesterdays disappointing existing home sales data. With the University of Michigan Consumer Sentiment Index due later today a great deal will rest on this figure at least meeting expectations of a number around the 70 level, anything less could cause a big sell off.

The Federal Reserve kept their interest rate target unchanged last night and gave no indication as to when this policy may change. The only real news was that they have delayed the date by which they expect to conclude their purchases of $1.25trn of agency mortgage backed securities which has been moved to the 31st March 2010, 3 months later than initially planned. The Fed statement shows that they expect a weak recovery with no sign of inflationary pressures expected given the significant output gap that remains.With the market becoming increasingly fixated with the prospect of when the Fed is going to change strategy there was certainly nothing within this statement to suggest a change in policy any time soon. The sell off last night looks like nothing more than profit taking and nerves taking hold but it is unlikely yet to be the start of any major short term reversal.

The markets seems to have run out of puff with a strong rally yesterday slowly disappearing as the day wore on. A sell off at this stage would be healthy and a move below 5000 would make trading considerably easier. The final quarter of the year could see modest gains from current levels but I am not sure this would be justified at present. The macro economic picture is likely to hit some significant headwinds as we move into 2010.

Whilst it is always nice to keep up with the performance of the market sometimes it is better to wait for a good volatile day to place a trade. At the moment there is a real scarcity of stocks that our trading model finds as possible targets and we really need a day with the market down 60 to get a good trade away. It will happen but when is another matter.

We managed to do a quick trade in Sainsbury late this afternoon. The shares drifted off to around £3.325 and at that point they were down on the day. We have been monitoring the shares closely all week and with increased buying seen previously in the £3.30-£3.32 range and with the position of the market at the time it generated a buy signal fo us and we were able to close out an hour or so later at £3.36 giving a 1% gain ungeared. We will continue to watch Sainsbury next week.

Having waited all week for a reasonable one day fall in the FTSE100 it looks like the wait will continue. The market has suddenly become the home of the momentum trader and volatility trades seem to be out for the time being. It is frustrating waiting for some good two way movement to get good trades away but this is the nature of the game and from my point of view waiting a little longer will not hurt. I mentioned Unilever yesterday and the shares have now shot through the £17 barrier which is a little disappointing but I remain hopeful that at the very least a bout of profit taking will bring them back into buying territory.

During the last week in my cfd portfolio I have traded GlaxoSmithkline once and also a quick trade in Sainsbury. Next week I would like to see the market come back a little to offer up some good trades and in the absence of this it will again be a quiet week.

The last few trading days have been more about preparing for the next bout of volatility. Periods during which markets go up in a straight line are almost impossible to trade unless you are prepared to buy and hold. Inevitably profit taking or a sell off will occur especially given the still weak economic outlook and I believe the market is getting ahead of itself. It is not unusual to see the momentum being maintained at this stage of an equity market rebound. There is a huge amount of cash on the sidelines and it is now finding its way in as managers and investors start to fear for their performance and don't want to miss the next leg up. This is always a dangerous time from a trading perspective and for us it is better to wait for weak days to pick off stocks that have perhaps underperformed or perhaps have good strength but lose just enough on the day to make a trade profitable perhaps using a swing trade pattern as the basis of the trade.

Once the market settles down and some stocks again find new ranges we will start actively trading again. One stock in particular that I haven't traded for a while but is starting to look like an interesting trading stock is Unilever. I will be busy writing a note on Unilever today and I am hopeful that I can start trading the stock again once the stock market jitters return!

Plenty of economic data in the US this week will keep the market busy and volatile. Inflation is very much on the agenda with the US Producer Price Index for August due tomorrow which is expected to increase by around 1% due to higher energy prices, having declined by -0.8% over the previous month. Also due tomorrow are retail sales data for August which according to the consensus is expected to show a 2% improvement over the month following a dip of -0.1% in July, spurred on by the ongoing bounce in auto sales. Tuesday also brings the New York Empire Manufacturing index which following a better than expected ISM figure should show further improvement into positive territory with the consensus expecting a figure of 14 for September up from the figure of 12 posted for the previous month which would take it to the highest level since the end of 2007. A positive figure indicates expansion. On Wednesday in the US we get CPI data for August which is expected to show an improvement of +0.4% over the month, primarily due to higher gasoline prices. The debate as to whether a prolonged period of deflation is on the cards in the US will rage on and with so much spare capacity it remains a possibility. On Thursday we get Industrial Production data for August with a month on month increase of 0.7% expected boosted by increased auto production given the success of the cash for clunkers scheme and the fact that many auto manufacturers have now run down inventory to levels where increased production is now required. This will have had a beneficial impact on the parts and other industries reliant on auto production. The Housing Starts data due on Thursday is expected to show a 5% improvement to an annualised rate of 600,000 units. Finally in the US on Thursday we get the Philadelphia Fed Manufacturing index which is also expected to show further improvement during September with a reading of 8.0 expected from the previous monthly reading of 4.2. Overall the data due this week should provide more evidence of a bottoming out process in the US which is likely to provide more support to world equity markets in the short term.

Elsewhere keep a look out for the UK CPI data tomorrow which is expected to show a 0.3% improvement during the month of August with the year on year rate expected to decline to 1.4%. On Wednesday we get unemployment data in the UK and EU CPI data for August. On Thursday in the UK we get retail sales data for August worth a modest month on month increase of +0.3% expected.

With stock prices across the board moving to new levels it becomes very difficult to find high probability trades. You do need downside volatility to throw up good trading opportunities unless you are willing to sit on losing positions if the market turns against you. These are not my favourite conditions for short term trading and this week it has been difficult to find good trades. Even our faithful Imperial Tobacco has shot off into the distance and with an IMS statement due from them on the 22nd September they are currently off my target list. One stock that I have actively traded this week is GlaxoSmithkline which looks set to be left behind by the current rally. There is value in this stock but with ongoing concerns over patent expiries the market is unlikely to chase them much higher. If we get some good volatility in the market next week rather than a straight upward movement there may well be opportunity here.

The Federal Reserve's Beige book provides a good snapshot of current economic activity among the 12 Fed Districts. The most recent published yesterday provided good evidence that economic activity has stabilised but it is yet to show any real signs of improvement. Comments such as 'flat retail sales' with consumer spending weak in most districts suggest that consumers remain very frugal with their money and are still steering clear of luxury items and discretionary purchases instead focusing very much on necessities. This is the real issue in terms of any recovery. Arguably the 'cash for clunkers' has provided a short term boost which is not likely to be sustainable.

One area of continuing weakness highlighted in the report was commercial real estate where demand for space in all districts remained weak with construction continuing to decline. The residential housing market is seeing better activity according to the report but inevitably a lot of this will be due to distressed sales rather than a fundamental pick up in demand.
Another crucial area covered by the report is capacity utilisation, the proportion of factory volume in use. It remains at close to an historic low with just 68.5% of capacity in use. That is a significant number and undoubtedly means there will be little pricing pressure in the economy for some time to come.

Overall reading through the details of the report it is hard to get excited about a strong recovery. Whilst a good Q3 GDP number appears likely especially as we see a contribution from inventory re-stocking and a general pick up, there remains in our view a risk that the Q4 GDP number could easily slip right back possibly even generating a negative number again.

The move above 5000 in the FTSE100 was inevitable given the momentum the market currently has and inevitably with so much cash earning nothing on the sidelines it is now going to start getting sucked in as fund managers worry about performance and missing the next leg up. Where we go from here as always is almost impossible to predict and I would guess that with today's move we may well see a little more upward movement before a bout of profit taking brings the market back below 5,000. Equities are by no means cheap anymore and in some cases they are already discounting a fairly speedy economic recovery. With that in mind great care is required with stock selection. It does however seem that the market will hold most of these gains until we see to what extent economic recovery is taking hold and if it is going to be stronger than many anticipate, me included!

We have today closed out another Imperial Tobacco trade today for a 1% gain ungeared. Some people do wonder why there are times when we trade the same stock several times in a row and the simple answer is that if the stock is behaving and trending well there is little reason to look elsewhere. However, as Imperial are due to issue an IMS statement on the 22nd September it looks less likely that we will trade the shares again until after this date. One of our prime trading rules is never to hold a stock prior to a scheduled announcement. Undoubtedly there are times when it can work to your favour but there are also risks that the announcement could contain negative news and push a stock down heavily. The key to our success in trading is a few simple rules that we stick to and that does pay dividends. Sometimes it means we miss out on great stock moves, but sometimes it prevents a big loss and generally speaking if we can continue to deliver 3-5% ungeared return each month with the odd loss, it generates a more than satisfactory result over the course of a year.

I am yet to see any convincing data that supports the idea of a good economic recovery. Everything suggests a fragile and sub trend recovery at best with the real risk of a slip back to recessionary conditions. The saying that markets will climb a wall of worry seems to be the case at the moment but I fear that a reality check is still likely and some form of correction remains on the cards.

Today all eyes are on the non farm payrolls which have the potential to beat expectations of a decline in payrolls of -230,000. Nevertheless another big decline it will be and this trend looks set to continue into 2010. Trading in markets where valuations have improved so much and yet there is little support from an economic perspective does make life very difficult indeed. We have been focusing on the more defensive areas and will continue to do so in the hope that we will limit any downside in the event of a sharp turn in sentiment. The 200+ point decline in the Dow earlier in the week demonstrates how quickly markets can take fright.

After the heavy falls of yesterday we now wait to see if the Dow is going to continue to slip. With the ADP employment data due later today and the Non Manufacturing ISM tomorrow followed by the Non Farm Payrolls on Friday this is certainly a week in which we could see further falls if the data disappoints.

Yesterday with the extreme volatility we managed to take another 1% profit out of Imperial Tobacco and there may be another opportunity to trade this stock soon.

The market has opened weaker today with concerns that valuations have run ahead of the game. After such a strong rally some form of correction looks to be inevitable although there is every chance that today mat prove to be a blip before another attempt is made at getting closer to the 5000 level. Nevertheless we remain sceptical and to us it seems inevitable that once the market realises that a strong economic recovery is not going to happen it will correct yet again. To what extent is impossible to say, but it does mean that for us the strategy is to stick to the more defensive areas of the market where we can estimate the downside risks with far more accuracy than you can with some of the more cyclical areas which will be at real risk of significant declines if sentiment suddenly shifts. As the month progresses I do feel that the risks of some form of setback will increase. The general view behind this is simply that the current pick up in economic activity is primarily down to world governments spending huge amounts of money or incentivising consumers to spend such as the cash for clunkers and scrappage schemes. None of this is sustainable and any economic recovery after the government spending fades will have to be driven by the consumer. If you believe that consumers are in a healthy position then clearly there is scope for a sustainable world economic recovery. If you believe as we do that the consumer is still heavily indebted and the process of deleveraging will take years against a current backdrop of rising unemployment, declining incomes and the possibility of deflation, there is a strong argument that the current pick up will soon disappear and equity valuations will again be under pressure.

During the last week we unsuccessfully tried to trade our favourite stock, Imperial Tobacco and ended up closing out at a very modest profit. We do have several other stocks that are within trading ranges but all at present are dogged by possible negative news flow and until this is clear we will continue to focus only on one or two stocks that currently meet our strict criteria for inclusion within our trading strategy.