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It’s an interesting day today on the financial markets. U.S. unemployment has breached the 10% mark, and that is driving things. However, it isn’t resulting in the rout that some might have expected on the stock market. Indeed, the Dow, Nasdaq and S&P 500 are all barely in the black, holding tenaciously to gains made yesterday.

Another interesting result has been the sky-rocketing of gold prices. Just after the unemployment announcement, gold prices surged to $1,100, a new record high. Gold is back below $1,100, at around $1,093, but gold bugs are anticipating that the news means that pressure will be on the dollar going forward, as the Fed adheres to quantitative easing measures. MarketWatch reports on interest rate expectations:

Bets that the Federal Reserve will eventually lift interest rates from near zero fell slightly after the report. Fed fund futures indicated traders pared bets the Fed would raise its target rate by mid-2010 to 0.31%, compared to a 0.33% rate before the data.

On Wednesday, the Fed left its target rate in a range of between 0% and 0.25%, and repeated its commitment to keep rates low for the foreseeable future, citing slack in the economy and little reason to worry about inflation.

Helping the stock market is the commitment by Congress to prop up the housing market by extending the first time home buyer tax credit, and expanding it so that even some current home owners can take advantage of a tax credit. The news reinforces the idea that the government plans to continue propping up the economy as much as possible.

So, while the unemployment rate remains high, there are still indications that economic recovery will roll forward, albeit slowly. As a result, it doesn’t hurt to begin thinking about how you plan to invest in an economic recovery.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.

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Earlier today, the news was released that consumer confidence has dropped again. There had been hopes for a modest increase in consumer confidence ahead of the holiday shopping season, but employment concerns continue to weigh on consumers. The news sent the stock market lower in early trading, as investors worried that this vital segment of the economy would not be recovering anytime soon. However, things are taking a new direction, thanks to an upturn in oil prices.

Energy stocks rise, bring up the Dow

Energy stocks are on the rise, though, thanks to the latest movement in oil prices. MarketWatch reports on the response of the Dow to gains by oil:

U.S. stocks turned firmly up in mid-morning trade Tuesday, as crude oil futures rebounded from early weakness on optimism ahead of supplies data, lifting the energy sector of the market. …

Crude oil futures recently gained 67 cents to $79.35 a barrel, as traders weighed prospects of stronger Chinese demand ahead of U.S. inventories data due later Tuesday and on Wednesday.

Yesterday, energy stocks couldn’t hold onto gains, and were overcome by financial companies and sinking oil prices. Today, the opposite is happening. With the most recent report out of China about its likely economic report, speculators expect that oil prices will rise as China uses more oil to fuel economic expansion as we move into 2010.

The Dow still remains short of 10,000, and it is not likely to reclaim that level today, but there is a chance that, if things continue to move in this direction, we could see Dow 10,000 again by the end of the week. On the other hand, of course, any new economic data and concerns about economic recovery could change everything around, and send the stock market plunging again. We truly are at a very delicate and volatile crossroads.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.

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One of main features of day trading is profit taking. Today, profit taking is a major reason that the Dow is slumping in a direction that could very well take it back below the 10,000 mark. In profit taking, the goal is to get out when you have profits. In most cases, these profits are not necessarily large. They are often small, as investors take what they make to avoid the chance of loss later on. (The opposite of this is running profits, in which you try to keep going in the hopes that your profits will get bigger and bigger, attempting to sell just before the investment turns around.)

Profit taking is a strategy that can be used with most investments. Day traders use it with stocks, and it is a very popular technique for active forex traders. Some commodities and futures traders use profit taking as well. Profit taking is a way to ensure that your losses are limited, since you get out as soon as a position is profitable for you, whether than waiting to see whether things get better. You end up with a lot of small profits, rather than one huge payoff. On the other hand, you are less likely to sustain large losses, which is a very definite risk of running profits.

It is important to be careful when you use profit taking as an integral part of your investment strategy. Every time you place a trade, you end up having to pay some sort of a transaction fee. And, of course, the taxes on short term capital gains is larger than the taxes you pay on long term capital gains. So if you are not careful, your profits can be eaten away by taxes and fees.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.