The first trading session of 2008 had all of the appeal of a cold shower for the bulls. Fund managers and cheerleaders that were hoping for an influx on the long side of capital that had been parked on the sidelines during the holiday season, were treated with a nasty reminder that the domestic economy appears to be slowing quite markedly.

The S&P 500 (^SPC) came down tantalizingly close to breaking out of the triangular formation that I have been drawing on the chart during most of December. My suspicion is that we probably won't see a decisive breakout before Friday, but this is a hazard prone market with an expectation of plenty of whipsaws designed to trap those that are anxious to call the next directional trend.

I found little to attract me in scanning the charts this morning and will step aside during today's session.



Technology stocks were among the principal casualties in the sell-off yesterday. The move down below the 20- and 50-day EMA's on the exchange traded sector fund, XLK, was also accompanied by three times the average daily volume. There is probable support in the neighborhood of the 200-day EMA but I will be watching this fund and the Nasdaq 100 index closely later this week for clues as to the intermediate-term outlook. If the bulls are ready to throw in the towel on the techs, we could be looking at a rough first quarter for equities.



The price of gold also registered an all-time high above $860 in yesterday's trading. The chart formation and heavy volume yesterday on the exchange traded fund, GLD, encourage the view that we may well witness $1000 gold in the not too distant future.



Crude oil peaked above $100 during yesterday's session and the exchange traded fund, USO, which tracks the price of West Texas intermediate crude, shows that there was above average volume on the apparent chart breakout.



Clive Corcoran is the publisher of TradeWithForm.com, which provides daily analysis and commentary on the US stock market. He specializes in market neutral investing and and is currently working on a book about the benefits of trading with long/short strategies, which is scheduled for publication later this year.

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