This week could mark the tone for US Equities and the state of economy in the upcoming year.

So far 2008 has been a negative time for the US Equity markets and economy in general and during the upcoming days we are embarking on the third week of the new year, one that may be filled with interesting volatility.  Over the next few days, the markets will be greeted with a host of economic data releases that include Retail activity, Inflation reports and Housing information to mention a few, all of which will be watched with a close eye by market participants as to the real state of the US economy.  In addition to economic data, a few major Equity Indexes are trading just above important long term support levels. 

The questions on the mind of many are…how weak is the US economy and how low will the US Equity Indexes trade?  Having posted one of the worst starts in recent memory, the pain is already great in Stocks, and often a leading indicator of the future on the economy, it will be interesting to see whether the long term support levels will hold or will they give way for the major Equity Indexes.

Remember, much of the prosperity in the US economy over the past decade was attributable to asset bubbles.  The consumer hasn’t had an alternate form of income for some time now.  Time will tell how well the economy will fare…so far it hasn’t been rosy.