The 50bp cut in the UK base rate today is not unexpected although a lot of commentators were expecting a full 1%. The decision today does now leave room at least for a further two 50bp cuts over the coming months if necessary although the BofE may now resort to quantitative easing first to see what impact they can generate. I still suspect that rates will fall back close to 0 over the coming months.

The reported weekly initial jobless claims in the US were down although a little better than expected which may help sentiment although I fear the Non Farm Payrolls will be very bad although may have less impact now that the market has digested the equivalent ADP numbers yesterday.

With the weakness in Daily Mail today I decided to take a small long position especially with the market again weak. I have set a strict stop loss especially with the company due to update on trading in early Feb. This is a company that is going to suffer this year, but the dividend looks safe and any sign of an upturn will be very beneficial for the share price.

Dismal results from the US retailers today has taken its toll on the UK stocks and I am happy with the progress of my Next short which I am going to hang on to a bit longer.

The ADP employment data announced today was just awful and shows the extent of the problem facing the US. With an estimated 693,000 jobs lost in December the US is no where near a bottom and the Non Farm Payrolls on Friday are likely to show a very similar figure. Even with the Obama fiscal stimulus package it is difficult to see any meaningful recovery for some time and when you look back in history at previous stimulus packages they generally have had only limited short term impact especially if they come in the form of tax cuts resulting in the recipients increasing their savings rates rather than spending. The recent market rally may well end up being capped and it is notable that as of yesterday the FTSE100 had already exceeded some brokers year end forecasts!

Investors hoping for signs of an improvement in the economic outlook are likely to be disappointed over the coming weeks. There is still little sign of any improvement in economic conditions and if anything we are seeing further deterioration. In the US today factory orders were reported to have declined twice as fast as anticipated during November combined with a downward revision to the October number. The ISM Non Manufacturing Index was a little higher than expectations at 40.6, but still the second lowest figure on record and a clear signal that the US economy remains in the depths of a very significant recession. Pending sales of existing homes fell again in November. One of the key issues that need to be cleared before any kind of recovery can occur is stability in the US housing market, but with stocks of unsold homes way above the average it is difficult to see any kind of stability returning for some time and forecasts of a further decline in home values this year of around 15% in the US are probably not far off the mark. Bearing in mind that this will be the fourth year of falling house prices in the US does provide real concerns for how things will play out for the UK market.

The retailers trading updates kicked off today with Debenhams and Next. I do not follow the former although the figures on the face of it did not look too bad. The same could also be argued of Next, and the shares have responded strongly today with a 12% rise in the share price. I did take a close look at the figures and the greatest concern for me is that whilst they reported a 7% like for like decline in sales during the 21 weeks to the 24th December, bearing in mind that they reported a 4.4% decline for the 14 weeks to 1st November it does suggest that like for like sales growth for the 7 weeks to 24th December deteriorated badly to around -12%. If this trend continues into the New Year 2009 could be a lot worse than the market is currently anticipating. Sentiment however does appear to shifting in favour of the retail sector, but nevertheless with a strong performance in the shares today I decided to open a small short in Next. With a P/E of around 8x and a yield that is now under 5% I believe the shares are starting to look fully valued short term although at the moment with the market seemingly set on a strong January rally they could easily move ahead further which is why I have set a firm stop loss.

The next couple of weeks will focus attention on the retailers. Coverage of the disaster in the high street has been extensive over the Christmas period with many big names disappearing and the Sunday press had a field day with reports of how bad the M&S statement will be on Wednesday. Lots of commentators are suggesting that valuations have baked in the worst case scenario. I suspect not, and there is room for further downgrades and weakness in this sector. Nevertheless we cannot be far off the bottom with some of the big names such as M&S. I am keen to acquire some M&S for my physical and CFD portfolio but I would rather pay around £2 or less bearing in mind the strong likelihood of a dividend cut being announced at some stage this year. We kick off with a statement from Next which I am expecting tomorrow. On Wednesday we have M&S and Sainsbury on Thursday. I believe that valuations for the food retailers are starting to look a little high whilst the non food retailers may well offer some long opportunities over the coming weeks.

This week look out for the ISM Non manufacturing index tomorrow in the US. The manufacturing ISM data on Friday was bad and clearly shows that the US economy is still some way from a bottom. The big data of the week will be the Non Farm Payrolls on Friday in the US. These have scope to be awful and a big figure of over 600,000 jobs lost cannot be ruled out.

A New Year but the same issues to deal with and the next few months are unlikely to be any easier than the end of 2008. What we can hope for and expect is some form of equity market recovery before the year is out although probably not a strong one. It was interesting to read all of the forecasts from the equity strategists for the current year. As always none are expecting the market to fall and the odd one is expecting a very strong rally before the year is out. After the heavy falls of 2008 it would be difficult to predict further equity market falls during 2009 although I do believe there is a small probability that the FTSE will end the year weaker. All will depend on the timing of recovery in the US and the size of the Obama fiscal stimulus package will be key with a $1 trillion dollar figure more than likely. The real risk for the current year is deflation. It seems likely that it will arrive and it is more a question of how short lived it will be and indeed if there is the possibility of deflation quickly returning. Unemployment will rise significantly this year and there will be a significant output gap in the UK and the US which could very easily result in deflation becoming firmly entrenched and that would be very bad news for equity markets.

Still the market seems to be starting the year with a positive mindset and I think there must be a real possibility of the rally we have seen continuing during January. The arrival of the Obama administration will inevitably help, but unless we see the economic data starting to show some signs of at least stabilising I can't help but feel a rally early in the year will soon be lost. Today we kick off with one of the most important pieces of monthly economic data in the US namely the ISM Manufacturing data. It is already sitting at a historically low level and further disappointment will not help. Expectations are for the December figure to be somewhere around 35 and another significant miss may mean the rally ends today! I think there is a real chance of a miss with this figure which is likely to remain weak for sometime and a big miss will suggest that the US is nowhere near the bottom yet.

During the last few trading days the only action I have to report is a sale of my last holding of Tesco which had recovered well from the lows of £2.90 seen towards the end of 2008. I sold out at £3.61 and will look to buy back in if the shares move below £3.30 over the coming weeks. I see today that Daily Mail is trading at £2.90 which I think is a little expensive and I am hopeful of being able to trade this stock again this year if it moves back towards £2.50. The advertising market is going to remain very difficult this year and whilst Daily Mail will be a great recovery stock it is too soon to be taking any long term holdings and I would prefer to wait for more short term trading opportunities.

I still have the Unilever short in place and looking at the Asian markets where a good percentage of their profits are made I still believe that 2009 will be a difficult year for Unilever and the shares will struggle to make headway.

Just a quick post to report that I sold out of the Daily Mail on Tuesday morning with another profit allbeit smaller than previously. With the shares trading at £2.65 I felt it would be better to close out for a smaller profit before the Christmas break. I still have the Unilever short which is in profit and I will run with this holding into the New Year.

The next two weeks will be very quiet with little in the way of market moving data due. This may present the odd trading opportunity and I will post on days when there is something worth commenting on. Tomorrow we will get a final estimate for US Q3 GDP which is likely to be reversed down from the previous -0.5% to possibly up to -1.0%. Tomorrow we also get the University of Michigan Consumer Sentiment index which is likely to be static although it could show a slight improvement resulting from lower gasoline prices and mortgage rates. However the many other components are likely to weigh on sentiment still. On Wednesday keep a look out for the durable goods orders in the US which again are likely to show a fourth consecutive monthly decline for November. The real data kicks off the New Year on Friday the 2nd when we get the manufacturing ISM data which is more than likely to show another decline from the previous low which I think will put immediate pressure on the market.

Today my Unilever short swung back into profit and I believe that even if it does not reach my target before the end of December I am confident that we will see the shares weaken as we move into 2009. I have also purchased today Daily Mail again at £2.575 and I am hopeful of taking a quick gain on these before markets close for the holidays.

Very little to report for Friday trading. Unilever closed up 2% which leaves my short currently out of the money, but I am happy to hold. Daily Mail has quickly fallen back close to previous buying levels but I am happy at the moment to wait and see what happens over the coming trading days before buying back in. Daily Mail I suspect has suffered a further deterioration in ad revenues and the shares are likely to be under pressure during the first quarter. This is a stock with above average risk at the moment because of the scope for deterioration in current trading and as a result I want to buy in at bargain basement levels to limit any downside . However, this is one stock that will race ahead with any sign of economic recovery, but I cannot realistically see this happening until the latter stages of 2009.

There are several stocks that are looking like interesting short opportunities and I think that over the Christmas trading period we may see some form of modest rally on light volumes which could provide an excellent opportunity to short at higher levels. Of particular interest to me are Wm Morrison and Pearson.

It is very hard to know what the market will do in early 2009. I do believe that most economists are expecting a second half economic recovery and this would suggest equities will start to recover perhaps during Q1 2009. I however continue to consider the more bearish scenario as likely and I don't think we will see any solid sign of economic recovery until early 2010 although a lot depends on the US and just how much money the Obama Administration will throw at the problem in the form of a fiscal stimulus package. The size of the unwinding process and level of deleveraging we are seeing is unprecedented. There have been banking crises which have created recessionary conditions, but none on such a global scale. My best guest is that markets will trade within a fairly broad range during 2009 and I believe there remains a real chance that new lows are yet to be reached. In many respects this will at least provide ideal trading conditions.

The ONS retail data today is very hard to believe and it has proven itself to be somewhat prone to error during the last few months. I doubt you will find many retailers in buoyant mood following the report that sales were up 0.3% during November. Every piece of evidence suggests something very much to the contrary which is why the official data is generally better ignored at the moment. Of course with so much price cutting it is possible that volumes spiked up during November, but somehow I doubt that.

Today was a good day for my CFD portfolio. I have traded in Daily Mail this week and the second trade was successfully closed out this morning at £2.69. Had I waited much bigger profits were available during the afternoon when the shares hit £2.90. I generally set profit targets and once they are hit I find it far easier and more effective to take the profit. Generally speaking running a profit is never a bad thing, but with the level of stock volatility I prefer to stick with my initial target and I keep longer term physical holdings to take advantage of longer stock rallies when they happen. I mentioned yesterday that I was again watching Unilever which was close to being ready for another short position. The shares spiked up this morning and I took the opportunity to short at £15.52 which was higher than my previous entry prices. The shares do seem to have some relative strength at the moment, I suspect partially because of the currency benefits from their international operations. I may have to wait a bit longer than usual for this one to meet my set target price, but I remain confident and Unilever I believe will have a very difficult year during 2009.

Lots of economic data today all of which made grim reading. Activity on the high street is showing no signs of life according to the CBI Distributive Trades Survey. The survey balance fell to a record low of -55 against expectations of -41. This is a clear indication that despite the price reductions including the vat cut, there is little sign that consumers are willing to spend. The survey was conducted from the 28th November to the 10th December and we could still see a surge in spending, but clearly the signs are not good and the outlook for 2009 can only be described as awful. The employment figures today brought no relief with a further 76,000 out of work during November, a trend that is gathering speed at a worrying rate.

With the Fed reducing rates to near zero yesterday there was plenty of focus on the MPC meeting minutes published today which showed that a cut of more than 1% was seriously considered but ruled out due to the potential shock factor and concerns over the impact on the exchange rate. What is clear not just from the minutes but the speed at which economic conditions are deteriorating is that another serious cut will come in January, perhaps as high as 1% again. The headlines are starting to turn more to the concept of quantitative easing as the next course of action once monetary policy is spent and I am sure that the UK is also now firmly headed for interest rate close to zero and QE will be the next policy to be adopted. I will go into QE in more detail in the coming weeks.

I mentioned yesterday that I had successfully traded Daily Mail and the shares at the end of the day were back to where I had bought them, but I had held off buying back in because the price movements suggested further weakness. This certainly turned out to be the case this morning and by waiting I was able to buy back into the shares at £2.5575 against my previous purchase price of £2.69. This does demonstrate just how easily you can be caught out by becoming fixated with a particular entry price even if it has been successful for you previously. In many instances a chart will just not show this to you and neither will any software program. It is more down to having watched the stock and seeing how it is behaving relative to the performance of the market. It doesn't always work like that, but there are times when experience of having watched a stock closely for a very long period can be very helpful. Tomorrow I will be hoping for a positive start to trading which may well give me an exit from Daily Mail, but I fear that at best we will get a mixed start to trading tomorrow. I am also watching one of my recent favourite short stocks, Unilever, which closed above £15 tonight and I may well enter another short again depending on what the general market is doing if the price moves further ahead.

The unexpected news that the Federal Reserve has decided to target a Fed rate of close to 0% has provided a strong end to trading in the US with the Dow up by 360 points. The fear of deflation is a real one and clearly the signs are not good at the moment which is why the Fed is throwing the kitchen sink and anything else it can find at the problem. The initial market reaction is predictable and I can't help but think today's gain will quickly evaporate. There are real risks that deflation will arrive soon and the monetary policy machine has just run out of amo. However, the actions taken have been decisive and we can only hope that it proves to be enough in the long run.

I closed out my long position in Daily Mail today at a nice profit. The shares popped over the £2.80 mark and I sold out at £2.83 having bought them at £2.69. I was quite lucky as they quickly fell back and in fact at the close were back to where I paid for them. I wasn't tempted to buy back in because of the impending Fed decision. I think a key aspect of very short term trading is not always to become fixated with a particular target price for a stock even if you have successfully traded it before. The price movements of Daily Mail today suggested to me that it may well fall below £2.69 near term and I have decided to see how the price behaves tomorrow before taking another position.

The CPI figure for the UK today did not show as big a fall as some expected, with a decline to 4.1% against expectations of 3.9%. Nevertheless the trend is for a significant drop over the coming months and I believe interest rates in the UK will continue to fall with another 0.5% cut due in January.

The Friday sell off gave me the opportunity to take a long position in Daily Mail. It is one of my core monitored stocks and the downside at present looks limited to around £2.40 which is well within my stop loss. It is a stock that is relatively volatile and with the market down 2.5% on Friday and a fair chance of some sort of car industry bail out announcement in the US within the next few days, I believe there is a fair chance of seeing a modest bounce in the market. Fortunately the Dow reversed its losses on Friday and we should at least get off to a good start tomorrow morning.

This week we have the Fed interest rate decision on Tuesday when we are very likely to see a 0.5% cut in the Fed rate. Whilst widely expected I suspect that it will help the market on Tuesday. We also have the CPI data in the UK and US on Tuesday and Europe on Wednesday. All sets of data will show weakness driven on by lower petrol prices and food.

We are now approaching the holiday season and there will be the possibility of a market rally as volumes fall, which is something to bear in mind especially when considering short positions during the last days of the year. There are many expecting a New Year rally which is also a distinct possibility, but I remain unconvinced that anything is sustainable at this stage.

A good day again for my cfd portfolio. Unilever sold off nicely and I closed out my short position. I am hopeful that the shares will rally back above £15 at some point before the end of the year to give me another opportunity. I am not inclined to go long of Unilever at present because I do feel there is a lot more downside than upside in the stock. At present they seem to be happy trading at between £14 and £15.50, but I think that by mid 2009 they will have slipped further back to between £12 and £14 as the slowdown in Asia and the emerging markets impacts on volumes. I would find the shares a very interesting long term position if they were to slip back to the £12 mark. Unilever is a quality company and in better economic conditions they will recover well.

The high street is likely to be a blood bath over the Christmas period. The number of sales we are seeing and the evidence you see just by walking around the shops where you find a distinct lack of people with bulging bags shows just how bad things are. Tesco is apparently going to start an aggressive sale tomorrow with 50% off up to 1,000 lines. This is a significant move and does show that Tesco the Goliath of the sector is under real pressure at this critical time. The crucial Christmas trading updates in January will be nervously awaited and undoubtedly will be bad. However, I believe this will offer a good trading opportunity and I am expecting to see the retail sector hit hard in early January providing what should be a good opportunity to pick up some of the bombed out stocks at bargain prices.

A quiet day with little to drive the markets either way. Unlever sold off over 50 points leaving me comfortably in profit and I am hopeful of closing the position tomorrow with my target price not too far away. I am keeping a close eye on Wm Morrison at the moment which seems to have some moment after its recent strong results. I believe that the shares are starting to look fully valued and they are increasingly looking like a potential short.

Friday is the key day for the markets this week when we get US retail sales and I suspect that we will see some weakness ahead of these figures which are expected to show a month on month decline of around 1.7%.

A second gain for the FTSE today despite yet more gloomy economic news from the manufacturing sector, plus poor retail sales figures and another bad house price index move showing a 2.5% decline over the last month. Poor data is very much the norm at the moment and only the big data is likely to move markets which we are most likely to see on Friday with the publication of the US retail sales.

I was watching Unilever closely today and even with the market up by over 2% the shares were struggling to make much headway which is a good sign and I remain confident about my short position although it may be a few days yet before I get an opportunity to close it out. Given the strength in the market over the last two days and a weak end to Wall Street trading today should mean a weak start to trading tomorrow.

The life sector has enjoyed a good few days with concerns over solvency appearing to subside now that the market has at least stabilised. I did mention the potential for this sector a week or so ago and I still believe it is a sector that will outperform strongly if markets rally much further. My only concern is that if share prices continue to strengthen we may see some within the sector look to raise cash purely to strengthen their position rather than out of necessity.