With America closed today the market has leaped up to new highs and looks likely to remain strong without any real news flow to drive it. The economic data in the US doesn't really kick off until Wednesday with publication of retail sales data for September which excluding auto sales is expected to show a modest improvement on the month of +0.2% according to the consensus. The overall results will inevitably be negative due to the demise of the 'cash for clunkers' programme. Also on Wednesday we get the minutes of the latest FOMC meeting. On Thursday in the US we will see the publication of the CPI data for September which is expected to show a modest +0.1% increase month on month. Also on Thursday we get a snapshot of the health of the US manufacturing sector in Philadelphia and New York both of which are expected to show an ongoing expansion. Finally, in the US on Friday we get the University of Michigan Consumer Sentiment data for October which is expected to show a modest improvement to 74 from the previous reading of 73.5.

In the UK look out for the September CPI data which is expected to show a 0.3% month on month increase which will bring the year on year rate down to 1.3%. On Wednesday we get the UK unemployment rate for August which is expected to tick up to 8.0% from 7.9%. In Europe look out for the ZEW economic sentiment survey for October due to be published on Tuesday. On Thursday we see the publication of European CPI data for September.

Last week I mentioned that we were again keeping an eye on the tobacco stocks and we did do another Imperial Tobacco trade on Friday when the shares were weak early in the morning. The strength in the market today has allowed us to take another 1% out of the stock and we have closed the position. Overall Imperial looks likely to become our most successful trading stock this year.

This week we are keeping a close eye yet again on the tobacco companies, BAT and Imperial. Having recovered along with the market they appear to be taking a breather and probably only temporarily have become range bound with the market likely to fluctuate around the 5000 level at least for the time being. This may again provide good trading opportunities and a lot depends on the movement of the market which may allow a swing trade in one or both.

The US payroll data announced on Friday ended a week in which we have seen plenty of poor economic data. The decline in payrolls of -263,000 in September was a lot worse than the anticipated decline of -180,000. The decline in service sector employment was -147000 compared to the previous monthly decline of -69000 whilst there was a worrying deterioration in the government employment number with a decline of -53000 compared to the previous monthly decline of 19000. This was disappointing although unlikely to be the start of any further deterioration with the unemployment set now to move up to around the 10% level.

On Monday the market was saved by the Non Manufacturing ISM data for September which came in a little ahead of expectations at 50.9 suggesting expansion albeit modest within the service sector which accounts for the majority of the US economy. Recovery is happening but is unlikely to take them form of a V and still looks increasingly like a U with the possibility remaining of a double dip recession.

The market has pushed back above the 5000 level during the last two trading days but we feel it is likely to hug this level above and below for sometime to come.

Yesterday we took a quick 1% out of GlaxoSmithkline with the shares having declined by 1% during the morning especially with the market nerves ahead of the ISM data. The strong opening on Wall Street quickly pulled the general market up and having bought in at £12.05 we closed out at £12.185.

The ISM Manufacturing data announced for September was disappointing with a decline to 52.6 from 52.9 the previous month. This was against expectations of a rise to anywhere between 53 and 55. The market is fixated with what today's Non Farm Payrolls figure will be. Looking at the employment element of the ISM data it was stuck at 46.2 from 46.4 the previous month suggesting little in the way of an improvement in the rate of job losses. The Non Farm Payrolls were expected to show a loss of around the 150-200K mark for September although Goldman Sachs changed their forecast yesterday to -250k. Anything worse than this level will be taken very badly by the market.

We have now had a plethora of poor economic data which has stopped the rally and at the time of writing brought the FTSE100 is back below the 5000 level. After today's Non Farm Payroll we have the all important Non Manufaturing ISM survey on Monday in the US which is currently expected to show an improvement and possibly a move above the key 50 level which would indicate expansion. Again any further disappointment in the shae of a month on month decline will be very bad news for market sentiment.

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.