Wow what a week. At the moment we have friends over and I haven’t been spending too much time following the markets. I had expected the Obama rally but had thought FTSE 100 would go to 5000 before falling back. I also thought the rally would merge into the Christmas rally and we would be looking at a happier Christmas. However markets had another idea and my shorts never went in so I’m sitting on the sidelines which I’m happy about.

I’m more focused now on making a few good trades and leaving them work. I’m in this to make money and after losing everything I made I’m not in the mood to give back more. I have one existing bad trade to close and once that is done I will sit back and re evaluate the recent market moves.

With an unprecedented cut by the BOE of 1.5 percentage points and .5 by the ECB there is allot to digest out there. Deflation seems to be the new favourite word on the street and should this occur things are going to get very ugly. For the moment I’m sitting tight.

The FTSE has reversed its earlier gains and is loitering around 5400. Any attempt from here to push the markets higher will be sold off as the bears have full control. Unfortunately the willingness of the bears to sell doesn’t seem to extend past 5400 which leaves us waiting for the next shoe.

I’m unwilling to buy into this market due to the level of calmness that seems to be around. There is a level of comport at these levels which many believe is simply where the market should be in relation to the underline economy. I tend to agree with this view and whilst a bounce may be on the cards it is in no way certain. What I do believe we can expect is a pick up in volatility. I’m waiting on (1) Volume selling and (2) a pick up in the VIX which measures volatility.

Data out this week includes the Bank of England rate decision which shouldn’t be much surprise and more bad news from the financials as more banks including Credit Suisse and UBS are forced to look for more capital. Oil seems to have backed off as the dollar falls based on a more dovish view from the ECB and that takes me back nicely to our Monday morning blues as the market looks for direction.

In stocks to watch AIB has dropped another 2% at 8.99 as sloppy management and the disposal or important documents comes into question. Paddy Power rises 1.5% to 19.30 after Goldman Sachs raises it to a buy taking it to a drop of 14% for the year. In the UK British Airways makes a rebound after prolonged selling and RBS is down 4% in London.