Weekly Market Update -Jan 5 New Year

Happy New Year! Enjoy it while you can. The markets started off the year on a sour note, with one of the worst starts for the DOW in over 70 years! (see link below) Everything was on sale this week (stocks, that is) -maybe it was an after Christmas sale.

The holiday season was terrible for retailers too. Meanwhile, not to sound like a broken record, but the sub-prime problem is still lurking in the background, with rumors of more big writedowns coming.

Oil prices rose again, finally hitting $100 per barrel before retreating back to around $98. Gold and gold stocks also continued higher, along with other food related commodities like Wheat, Corn, and Soybeans.

The week ahead kicks off earnings reports for the first quarter with Alcoa leading the pack on Tuesday. Most of the large companies don't report till the following week though. The market might bounce back a little from the recent non-stop selling, since it is at a support level here, though it it could also just keep going down some more. There is no clear short term direction at this point.

If you are wondering whether we are heading into a recession, just take a look at some of these stocks (type the appropriate symbol after viewing the first one):
Starbucks(SBUX) Sears(SHLD) Bed Bath & Beyond(BBBY) Target(TGT) Ford(F) AutoNation(AN) American Express(AXP) Pulte Homes(PHM) Home Depot(HD) Fedex(FDX) Semiconductor Index (SMH) Real Estate Index(RTH) Consumer Discretionary Index(XLY)

Also, take a look at some of the sub-prime casualties: Citigroup Merrill Lynch Bear Sterns Countyrwide Financial Fannie Mae Washington Mutual E*Trade MBI

On the bright side take a look at some of the winners for 2007:
AAPL RIMM GOOG BIDU GME AMZN JEC ISRG
The red line at the bottom of the chart shows the performance comparison to the S&P500 index, a good proxy for the overall market -as the chart shows, it pays to pick winners!

What are some of the 'experts' predicting for 2008? More interest rate cuts (which would imply a lower US Dollar), a possible recession, a weak stock market, and higher energy and commodity prices.

Notable events this year -US Presidential election, The Olympics in China.

New Year resolution for traders and investors: Draw a 'trend line' and exit your position when the trend is broken! You don't need to be a rocket scientist to draw a simple trendline on a graph either (see examples). This works for both short term and long term time frames.

Also don't try to pick up some of these battered Bank and Financial stocks yet -you have to wait until the 'down trendline' is clearly broken and the stock is showing signs of strength to the 'upside' (see example).

Lastly, if you still believe in buy and hold, note that Citigroup gave back 5 years worth of gains in just a few months last year, as did many other stocks, and that after 7 years the Nasdaq is still showing a 50% loss! Meanwhile other stocks and sectors have experienced well over 100% growth since 2000, some even showing over 1000% growth, so stop 'holding' and get out of what's not working and get into something that is working.

News stories this week:
10 best-performing Fortune 500 stocks
Best and worst stocks of 2007
'Fast Money' Recap: Worst Start since 1932
Brutal selloff on Wall Street
Oil prices fall back from $100 barrel
Goldman's Double Take
Stocks and Indexes mentioned in this blog are for educational and illustration purposes only.