— "Calling the Trend" Column, by George Leong, B. Comm.

Markets are facing some resistance at this juncture on renewed concerns regarding the strength of the economic renewal in both the U.S. and abroad. Federal Reserve chairman Ben Bernanke suggested the U.S. was facing "formidable headwinds" that could impact the strength of the recovery and added that interest rates will be maintained at the record low for an "extended period." Good for financing, but bad for the economy. This news could hamper the possibility of seeing a Santa Claus Rally, as we move towards Christmas and into January.

At the monthly Beige Book address, the Fed was upbeat about the economy and the low inflation, which will likely allow the Fed to leave interest rates near zero into 2010. The concern is that saying rates may stay low suggests that the economy is not growing fast enough and could face more hurdles. This is what is concerning traders. The market is pricing in stronger growth, so there could be some issues in 2010.

As I have mentioned in the past months, a significant area will be retail sales, since it accounts for about 70% of GDP in the U.S. versus about 20% in China. As of December 3, the retailing sector was showing some early weakness in the November results. Of the 15 retailers that reported as of that date, 11 were short of Street estimates. Black Friday saw flat sales growth, but online sales were strong. As I have said, we feel that consumers may wait for larger discounts before buying; yet, due to stricter inventory control this year, there may be a run on goods in the holiday season, so there may be less discounting.

Here we are, heading into the last few weeks in 2009, and it has so far turned out to be better than I initially expected back in January. In the absence of a major setback over the last few weeks of the year, the gains in 2009 will be best since 2003, especially given the losses of 30% to 40% in 2008. The question is: will the markets repeat in 2010? We think not, as we feel much of the recovery in 2010 has been discounted into the stock markets, so the gains may be less.

The thing that has impressed me is the ability of the major stock indices to avoid a major sell-off since the rally began from the early March lows. Even in spite of some selling in China and concerns regarding the level of the economic recovery from the recession, markets have performed above expectations.

The leader in 2009 has been the technology sector, with the NASDAQ up about 38% as of December 8. Innovation in technology was the driver and we feel technology will continue to lead markets in the years ahead. Simply, there is really no other area where the innovation and advancement is as high. Investors will always pay for innovation and new technologies. The only other sector may be biotech, but there is higher risk there.

At this point, the stock markets are facing some resistance, but are continuing to hold, with some indecisive trading at the current levels.