The market had a good day following on from the reversal in the Dow on Friday and another strong day from the Dow today. It is very difficult to know just how much of the recent rally is justified. Undoubtedly a huge fiscal stimulus package in the New Year from the Obama administration will help, but to what extent it will cushion the blow of the recession is an unknown. Given the speed at which employment in the US is falling the fiscal stimulus package will have to be huge to have any impact and press reports of up to $1trillion seem close to the mark. It is a huge figure, but given the amount of money that has already been thrown at the problem, even at $1trillion it will not be a quick fix. It is certainly too early for the markets to be recovering in anticipation of economic recovery which I feel we won't see any real signs of until the closing stages of 2009.

Whilst I hate trying to predict where markets are going I do think that there is a possibility of a rally in the closing stages of 2008 purely due to a combination of hope and as markets slow down for the holidays volume will be low which may well aid a rally. However, even if we do rally I think there is real scope for another big sell off as we enter 2009. Fourth quarter US GDP will look terrible and the ISM data looks set to continue deteriorating over the coming months. A real catalyst for recovery in world markets is still some way off.

Today in my cfd portfolio I opened another short in Unilever which closed a little above my entry price. Trades do not always work straight away and I have set a stop loss some way above my entry level. I do not anticipate the price hitting my stop and I am happy to wait for the shares to hit my target. Apart from that the rally has taken some stocks to levels above where I would consider long positions at the moment so it is a case of sitting and waiting.

I mentioned yesterday that the Non Farm Payrolls could have been a shocker and they certainly were with 533,000 jobs lost in November compared to expectations of around 328,000. There was a fairly strong indication that this was going to be a big figure when the Non Manufacturing ISM figure came out on Wednesday with a plunging employment index. Despite one of the worst employment figures in history the Dow did manage a 259 point gain due to positive noises from an Insurance company, Hartford Financial Services, which increased its profit forecasts. A market rally on the back of this is more hope than reality. Being trained as an economist I do spend a lot of time looking at the numbers which are produced on a daily basis and whichever way you cut it there is still very little light at the end of the tunnel. I hear talk on a daily basis of how markets discount a recovery a good 3 to 6 months before it actually starts, but looking at the data it is hard to see any sign of real recovery until late 2009 at the earliest. Given the speed at which the US in particular is in decline and the fact that the UK is following a very similar path does demonstrate that despite everything that has been thrown at this downturn from money to now guarantees to pay defaulted mortgage payments, it is still all having little impact and at the end of the day you cannot stop what is the unwinding of many years of credit inflated growth. However , I don't wish to sound too pessimistic as a recovery will come, but as to when remains a big question.

The housing market is in a real mess at the moment. The latest figures suggest a meltdown is still ongoing and there is little sign of any stability in the housing market. Yes interest rates are coming down, but as to whether this will make any difference is debatable. At the end of the day it is difficult to see anyone rushing out to buy a deflating asset even if it costs less to service the debt if they can get it. I think the housing market has someway to go yet and we will not see any sign of stability until 2010 at the earliest and the doom mongers forecasts of a 40-50% peak to trough decline may yet come to fruition.

My CFD trading portfolio had a good week and I will be looking over the weekend at where the next opportunity may come from. I am always on the look out for stocks to add to my list of key stocks to monitor and one that I am increasingly interested in is Wm Morrison the supermarket chain. They delivered a strong set of results this week and clearly are doing a better job at generating like for like sales growth than Tesco, but their shares to me are starting to look fairly valued at best and unlike Tesco they have no real growth prospects outside of the UK market. It is going to be increasingly difficult for them to deliver the kind of exceptional like for like sales growth we saw this week and I cannot see the shares making much more progress. For this reason I may well add them to my list of stocks available for shorting and they may well make an interesting pairs trade with Tesco at some point.

A good day for my cfd portfolio. I mentioned yesterday that I was looking at Unilever with a view to shorting the stock if it pushed over £15 this morning.The market did start off in positive territory and this was enough to push the shares comfortably over £15 and in fact they pushed up to as high as £15.47. I entered a short at £15.27 which was a little early given the move up to £15.47, but I was comfortable with my price. The shares started to sell off with the market after the MPC announcement and they quickly fell to £14.69 where I closed. This is a typical trade and is a good example of how you can set out your strategy each day focusing on a target stock and sticking to a target price.The shares closed the day at around £14.95 and I may look to do the trade again depending upon how the market behaves tomorrow. The fact that the shares were able to make £15.47 quite quickly this morning does suggest that next time I may be able to achieve a higher entry point.

The interest rate decisions today from the MPC and the ECB were well flagged and I am certain there is further to go.I believe we can expect another a 0.5% cut in January from the MPC.

Tomorrow in the US we have the Non Farm Payrolls which are going to be bad. A decline of 300,000 is most likely, but there is definitely a real possibility of a shock tomorrow.

The service sector was in the news in the UK and the UK today. The Purchasing Managers Index in the UK fell to a new low with the service sector now contracting for the seventh month in succession. The real shock today however was the US ISM Non Manufacturing Index which literally plummeted to 37.3 against consensus expectations of a figure of 43. That is a big miss and if you drill down into the constituent parts of this index the real worry is the Employment Index which declined to 31.3 from 41.5. This is a significant decline and suggests that the unemployment rate in the service sector is going up significantly. The expectations of a 300,000 drop in the Non Farm Payrolls on Friday could easily turn out to be a higher figure and certainly the trend suggests this figure will be increasing over the coming months. The US is in a deep recession and the fact that monetary policy is now running out of ammo (a further 0.5% cut in the Fed rate expected this month will bring the rate to only 0.5%) suggests that a big fiscal stimulus package will be required from the Obama Administration to have any chance of reducing the impact of a recession that already looks close to becoming a depression if the economic data we are seeing is anything to go by.

A good day for my CFD portfolio. I closed out the Vodafone at a good profit and I made a good profit on a second reduction to my Tesco position. The Dow has closed up today which I find difficult to understand given the scale of the drop in the ISM figure today. We should now see a modest improvement in the FTSE first thing in the morning and I will be keeping a close eye on Unilever which I may well short if they make good progress. Unilever is really going to struggle with the slow down in emerging markets and I can't see them making much progress over £15. The market may well make further gains as the day progresses with interest rate decisions due from the Bank of England and the ECB. I think with the poor service sector data today and the poor data in the build up to tomorrow we can almost certainly expect a 1% cut to 2% although I would now not rule out another 1.5%. The market is likely to take this positively at least initially.

Fortunately no major economic news to report for a change. Instead my focus today was on the Tesco results which were received well by the market after the press had speculated for the last two days as to what the outcome would be. The trading update today was for the third quarter with total sales up by 11.7%. UK like for like growth delivered 2% which was slightly better than the anticipated 1.5% whilst the international operation delivered 14.6% sales growth on a like for like basis. Price falls were the main reason for the UK slowdown although more encouragingly the like for like increase was due to volume given that inflation was non existent for Tesco pricing. Non food sales during Q3 were slightly negative on a like for like basis although this is no worse than the previous quarter. Asia delivered a strong performance with sales up 29.4% whilst Europe inevitably slowed down with like for like growth at 6%, but still a respectable performance. The company made clear that it has a very strong financial position and certainly there are no worries with financing. They will be scaling back capex next year to under £4bn against most broker expectations of between £4bn and £4,5bn whilst the company expects to be cash generative during the second half.

The shares rose by over 10% on the day partially due to relief and I suspect a degree of short covering as there must have been a few traders believing the worst given how quickly the world economic situation is deteriorating. I think Tesco is a great long term stock, but I did take advantage of the strength today to reduce my holding and if the shares move further ahead I may look to do so again in my CFD portfolio.

Today I also bought some Vodafone. The latest figures for Vodafone were encouraging and after the market sell off on Monday I took the view that today would see some recovery especially as the market opened down this morning. Market catalysts over the next couple of days will be the US Non Manufacturing index tomorrow which I think will probably meet expectations whilst Thursday brings the ECB and MPC rate meetings where we can expect some serious cuts and I think this may help the market to recover more of the Monday losses and take Vodafone high enough for a quick profit.

The economic data is getting significantly worse which does not bode well for world equity markets. The PMI Manufacturing data in the UK today was terrible falling to 34.4 which is the lowest level in the history of this index pointing to a substantial contraction in manufacturing output of over 10%. Mortgage approvals for October are bouncing along the bottom some 75% below their peak consistent with an annual decline in house prices of around 20%. With this kind of data knocking around I think it is safe to assume a 1% cut is almost certainly on the cards on Thursday. The MPC has very little to lose with another big cut given the outlook for inflation.

In the US the news was just as bad with the ISM Manufacturing data coming in below expectations and pointing to a contraction in the manufacturing sector not seen since 1982. This has caused a 680 point decline in the Dow this evening.

On my CFD portfolio I await the Tesco trading report in the morning. Given that there has been a lot of press comment about the expected decline in like for like growth I am hopeful that there will not be a shock to the share price. If they do disappoint given the current nerves the shares may sell off. With the market again likely to fall below 4000 there should be some more interesting trades being thrown up soon.

The big week of the month this week with both sets of ISM data in the US (Manufacturing on Monday and Non Manufacturing on Wednesday). Both will paint a bleak picture and consensus for Manufacturing on Monday is 38.4, but I think the figure could easily be worse than this whilst Non Manufacturing consensus is 43. On Friday in the US we get the all important Non Farm Payrolls which will almost certainly show a 300,000+ drop in employment, a big number by any yardstick. We also have key interest rate decisions from the MPC and ECB on Thursday. The best guest for the UK is either a 0.75% or 1% cut. Given that we have only just had the fiscal stimulus package from the government it may well temper the mood of the MPC and they may be a little more restrained in their thinking, but even so I think 0.75% is a minimum to expect. The ECB should also be in serious rate cutting mood with a minimum of 0.5% expected and I think 0.75% most likely. On Wednesday keep a look out for the European retail sales figure which is likely to show a 0.5% drop month on month.

For my CFD portfolio I will be watching the trading update from Tesco on Tuesday. We can expect a slowdown in UK like for like sales growth to what is likely to be the lowest level of growth for many years. Nevertheless international growth should still be healthy although we already know that areas such as Korea are experiencing a slowdown in the rate of like for like growth.

The European CPI data today has shown a massive drop from 3.2% to 2.1%. This pretty much brings the level into line with the ECB's target and the fact that we can expect the rate to fall a good deal further does at least add weight to the push for a combined 200bn euro fiscal stimulus package that has been recommended and for a further 0.5% cut in the interest rate which is widely expected next week.

A quiet day for the market with Wall Street having closed up yesterday with the S&P up 3.5% which gave the FTSE a good start which it maintained with no lead from Wall Street today because of the Thanks Giving holiday.

Not much economic data to focus on today apart from the Nationwide house price figure for November which showed a 0.4% decline, and this was less than anticipated. I am not sure how much you can take from this, but I guess that activity would normally slow at this time of year anyway and I suspect there are still a good deal of sellers that are yet to accept that sale prices will need to be adjusted to have any chance of achieving a sale. That is certainly the case around where I live where many houses have been on the market for 18 months and prices in many instances are the same as they were when these houses were first place on sale. I think the housing market still has some way to fall, and another 15-20% seems reasonable.

As part of my CFD trading I am always on the lookout for potential new stocks to incorporate and monitor in case a trading opportunity arises. I also find this a useful exercise in finding potential investments for my longer term physical portfolio and new medium term CFD strategies that I am looking to use. At present I am focusing on stocks that provide high yield that is sustainable whilst providing a reasonably reliable earnings stream to prevent any significant de-rating of the stock. However, when you drill down there are few stocks that offer a very safe dividend at the moment for a variety of reasons and sometimes it is better to focus on the worst case scenario of a dividend cut in calculating an appropriate valuation for a stock. On that basis there are quite a few stocks that offer good future yield even discounting cuts in their payouts. I have always been a fan of the life stocks for trading although more recently the sector has declined substantially with concerns over capital adequacy and the potential for dividend cuts and rights issues. All of the life companies have updated the market during recent weeks and most still have a sufficient cushion before they would have to consider a reduction to their payouts or worse still a rights issue. This is still a sector only for the brave, but I do believe that it has some of the strongest potential for recovery when equity markets start to pick up. Aviva reached an intraday low a few weeks ago of £2 and in a relatively short space of time doubled to £4. At the time fear was driving the market, and few people would have taken advantage of that price and doubled their money. Nevertheless this is a sector where there are bargains to be had if you believe in an eventual recovery. Aviva along with the Prudential are the more riskier plays at present given their lower surplus position and equity exposure whilst the likes of Legal and General has a comfortable surplus and although primarily focused on the UK market does offer what looks to be a safe yield (prospective yield is just under 10%) and will certainly recover well with any sign of improvement in the equity market. Even a 40% cut in the payout would leave the shares with an above average yield.

BT is a another good example, there has been a lot of talk of a cut in the payout, but we will not know for sure until mid next year. What we do know is that the board consider BT to be a yield stock and the Chief Executive has stated that he is keen to keep the dividend or at the very least maintain a relatively high payout. At their intraday low a few weeks ago the shares hit around £1 with an historical yield of just under 16%. At the time if you considered a worst case scenario of a 50% cut next year you would still have got almost 8%.

There are many stocks in the catefory of dividends at risk, but if you consider where the dividend could be rebased to you will have a better idea as to what is an appropriate valuation for a stock. If in the end the payout is not cut because conditions improve you may well bag a bargain.

The data for Q3 UK GDP was unrevised at -0.5% which was broadly in line with expectations. A lot of this was due to the fall in total fixed investment over the quarter which declined by 2.4% and is primarily attributable to the housing sector. A trend which will continue for sometime given the severity of the slowdown in housing. Dismal news on household spending today which declined by 0.2% compared to the previous quarter. It is increasingly hard to believe that we will see positive growth during any quarter of next year.

In the US terrible durable goods orders and a downward revision to third quarter growth to -0.5% combined with a 1% drop in consumer spending during October failed to upset the market. It would seem that the incoming Obama Administration is the reason for hope and the market ignoring the endless supply of poor data. It could also be argued that this data is now priced in, but I suspect not and if the economic situation continues to deteriorate as quickly as it is doing there is every chance that new market lows are yet to be reached.

Nothing to report on my cfd portfolio and I can't help but feel that after a 10% plus move this week we will be in for some consolidation. The fiscal stimulus packages that are being announced worldwide are undoubtedly helping markets at the moment. My main fear is that with such a sharp slowdown the personal savings rate is going to increase significantly and the impact of these packages will not be enough to prevent what still looks like turning into a deep and long recession.

I am not going to comment much on the Pre-Budget report which has been flogged to death in the press. I think the main point which is clear is that the forecasts for growth next year from Mr Darling are far too optimistic and to assume only 2 quarters of negative growth next year is I think wishful thinking. More importantly I don't believe that the stimulus will be enough and we can expect a budget deficit increasing further from his forecasts and an annual £150-£200bn is not impossible as the recession will take far longer and tax receipts I believe will be impacted far more than the government wants to admit to at this stage.

This afternoon the US decided to throw another £800bn around to improve credit flows with this new bail out known as the TALF, Term Asset Loan Facility with £600bn for Fannie, Freddie and Ginnie and another £200bn for consumer and small business loans. The Fed stated that this is in response to the cedit market widening in recent days. The announcement had the usual impact of boosting the market but this time I think common sense quickly prevailed and clearly there has to be fear as to the implications of the scale of such large intervention worldwide. Also the downward revision to Q3 GDP growth from -0.3% to -0.5% didn't help.

I used today's volatility for some good trading in my cfd portfolio. The initial boost to the market this afternoon provided me with a good profitable exit on my holding of DailyMail and General Trust. My favourite kind of trading with cfds is swing trading and as the market rallied initially this afternoon it also provided a good boost to Unilever taking them comfortably over £15 which I used to short the stock. This was a text book trade as the shares had been underperforming all day and as always when you get a wild upward movement the shares went with it and I shorted at £15.15. Within minutes the market was starting to reverse and because of the weakness in Unilever all day the shares very quickly reversed and I was able to close the position at £14.65. All said a good day for my cfd portfolio. I still have the recent cfd position in Tesco which I am holding onto.

All eyes on the Pre-Budget report this afternoon although most of it appears to have already been leaked to the press. It would seem we can expect a 2.5% cut in vat which is certainly to be welcomed and will help business and the general economy. The compensation for low income earners who have lost out on the basic 10p rate looks set to continue and a delay in raising corporation tax for small firms looks to be on the cards. Outside of this there is a lot more that can be done if the government is going for a £30bn giveaway. If you look at what the fiscal stimulus package achieved in the US it is safe to assume that any impact tends to be very short lived although the US version was based mainly on rebate cheques whereas the measures we will see today should have a longer lasting impact. That is not to say that it will be successful as it really is unknown territory in the UK and as to how a budget deficit of £120bn plus is recouped in the future remains to be seen especially if the next decade is one of sub trend growth at best which I suspect it will be. It would not surprise me to see the budget deficit going to a crazy level of closer to £200bn over the coming years if this recession/depression remains far more deeply embedded than many expect.

On the economic front look out for the UK business investment figure which is likely to be terrible. We also get on Tuesday a preliminary Q3 GDP figure for the US which is expected to show a contraction of 0.5%. On Wednesday we get the UK Q3 GDP figure which is widely expected to show -0.5%. On Wednesday we get the US durable goods orders which is likely to be an ugly number plus we get the US University of Michigan Consumer Confidence figure for November. On Friday we get the EU CPI data for November and the unemployment figures.

Another bad day for the market with Wall Street pulling us down during the afternoon with ongoing worries over the future of Citigroup. Monday should start a little better with the 6% rally on Wall Street during the last hour of trading which seems to have occurred due to Obama's choice of new Treasury head, Timothy Geithner. He does have good credentials, but I think the late rally was more a function of the market seeking anything positive to hang on to and a 6% rally on the back of this does seem a little optimistic. We have had a bad week for economic figures and the jobless figures announced this week in the US were terrible and possibly point to a Non Farm Payroll figure above 300,00 when it is announced in early December. It will be a long time yet before any of the key statistics are starting to show signs of stability let alone improvement.

Whilst we are undoubtedly in the midst of an ongoing bear market what we should also remind ourselves of is that a recovery will come and as always the market will discount several months in advance a recovery even if earnings and economic data is continuing to deteriorate. I have no idea when this time will come, but there is no getting away from the fact that at current levels even when discounting earnings falls next year and dividend cuts the market at current levels does look reasonable good value. If we do see another 10-15% come off before sentiment starts to shift I think that will provide those with a longer term bias to pick up some very cheap stocks. There are companies out there that generate good free cash flow and have very solid business models and dividends which eventually will be rewarded when market conditions start to improve.

My most recent purchases of Tesco and Daily Mail are now sitting on modest losses, but I anticipate a better start to the week next week and I am hopeful that the market may be able to put together a couple of days of gains which will be helpful after the heavy fall in the FTSE this week.

Another disastrous day for the market and with the Dow closing down over 5% again we face another bad start to trading tomorrow. Yet again the fear factor is taking hold and I think we will see the FTSE100 reaching new lows as we approach Christmas. It is difficult to see any near term catalyst that will at least arrest the current decline. Valuations are being ignored with so much uncertainty over earnings next year. At some point this will change, but with the next imminent potential disaster of the car manufacturers in the US anything can happen over the coming weeks. Whilst I am against protection for the car manufacturers I think some form of support is necessary given how fragile sentiment is and a big failure is going to hit the US hard.

I made a small mistake today in not setting a price on my system to sell my Daily Mail which reported today and my holding showed a very healthy profit whilst I was out of the office, but have come back with the market sell off during the afternoon. If the market heads south for the next couple of trading days I will be at risk of being stopped out but I am sure they have plenty of recovery potential if we get a positive day although I fear that is wishful thinking for tomorrow.

The minutes of the MPC meeting demonstrated today that interest rates will be cut a lot further. The fact that they felt a 2% cut was appropriate goes to show the severity of the downturn and is a huge change in thinking over the course of one month. The reason they did not cut by more than 1.5% was purely to avoid shocking the market any more than what did happen and more importantly it paves the way for another heavy cut next month. I would not be surprised now to see a further 1% cut in December taking the base rate to 2% and I think we will now see 1% by mid next year. There is little on the horizon to prevent relaxing monetary policy to historically low levels.

The CBI industrial trends survey published today shows that the manufacturing sector is in a dire state. Output expectations continue to fall and manufacturers now do not anticipate being able to increase prices at all. With output and prices falling manufacturers earnings are going to be heading south and even a weaker pound is unlikely to help due to the deterioration in overseas markets.

The FTS100 deteriorated in the last hour of trading having been down around 100 points for most of the day to end 200 points down. The situation in the US is deteriorating on a daily basis and there are quite a few analysts that now believe the S&P 500 will not find a floor until it reaches around 600 which leaves us with some way to go yet. The US CPI today collapsed 1% which goes to show the speed at which inflation is disappearing out of the system.

No activity on my portfolios today. The recent Tesco acquisition was looking good until the last hour when the share sold off along with the rest of the market and the same also of the recent purchase of Daily Mail. I am watching Unilever closely at the moment with the view to entering another short. The shares were relatively strong all day and I think if we get a late rally tomorrow afternoon they may pop back over £15 which could be quite interesting.