Despite the negative trend, there were several highly successful breakouts this week with four closing the week with gains of over 10%. and eight making intra-day gains above that level. As we recommended last week, breakouts can be profitable in this market but you must take your gains quickly.

The markets closed their worst January performance ever with another distribution day on Friday. To put that in perspective, the S&P history goes back 81 years and the DJI 113 years. A flurry of buying (by the PPT?) allowed the DJI to close just above the 8,000 level for the weekend. 8,000 is seen as an important psychological level.

The fourth quarter GDP numbers confirmed the recession and we are likely in for a worse first quarter ahead. GDP will probably stay negative through 2009. But this doesn't mean the markets will continue downward during 2009 as a change in sentiment could rapidly turn things around as fear turns to greed. Sentiment turned increasingly negative this week due to the pummeling the proposed stimulus plan has taken from Republican Congressmen and many economists on the right and the left. The mantra that tax cuts are necessary to help small businesses is meaningless unless there is demand for the products and services small businesses have to offer. Unfortunately, there seems to be too little in the stimulus package to help demand in the short term. RGE Monitor had the following assessment of the plan yesterday:

We expect that the plan will be improved and investor sentiment will turn around as the plan is signed into law.

Until then, the outlook for stocks is bearish. The chart of the NASDAQ shows a descending triangle which usually leads to a downside breakout. However, patterns that have worked in the past are no longer reliable as intervention and manipulation have been commonplace over the last year.