When 2014 started no-one could have imagined that barely six weeks in investors would be feeling rather shell shocked, as recent sharp declines slowly erode the early optimism that had marked sentiment at the beginning of January. With Europe set to open slightly lower this morning it is quite likely that the big question being posed by a lot of investors right now probably goes along the lines of whether these recent moves lower in equity markets are a correction, or whether we are seeing a marked a change in sentiment, and the possibility of further losses? This is certainly a valid question but we also need to look at the recent falls in the context of the gains seen last year, which on reflection had started to become overextended, as far back as the beginning of December last year. Technical indicators are a great way to show when a market is running ahead of itself and looking at the S&P500 and the 200 week MA we've been due a pullback for some time now. Looks like we may well be getting one, which could suggest we may well have seen the highs in the medium term, particularly if emerging markets start to see a much slower rate of trend growth. US bond markets are also indicating that investors seem a little more cautious than usual with yields falling despite the Fed now starting to taper its asset purchase program. This suggests investors are less worried about tapering, and more worried about emerging markets with their higher interest rates and slower growth prospects. This week's ISM data was no doubt affected by bad weather, but for investors worried about slowing growth, disappointing earnings and a slowdown in China it appeared to be the last straw on Monday, though we have seen some stabilisation overnight. A lot now will now depend on today's ADP jobs report and Friday's US employment report as to whether or not these concerns manifest themselves in further losses, or a stabilisation of some of the recent declines. We also get sight of the services ISM numbers as well, which have been showing some weakness in recent months, though we are expecting a slight tick-up to 53.7 in January, from 53 in December, which seems a touch optimistic given recent weather related problems. Will we get a positive revision on Friday after the weak 74k print in December, and will we get a the expected 185k number most analysts expect? More to the point will today's January ADP have another chilling effect on markets or provide a temporary respite? Expectations are for a gain of 191k, down from 238k in December. In the UK there has been no cold weather problem with yesterday's construction PMI rising again in January to 7 year highs at 64.6 which is encouraging for those who think the recent UK recovery is unbalanced and too reliant on the services sector, with the housing sector reporting the best activity in over 10 years. This needs to continue along with manufacturing as we look to today's services PMI which is expected to show a slowdown from December's, with expectations of a rise to 59, from 58.8. The recent sell off has masked a small improvement in European economic data but make no mistake concerns remain despite any improvement we see in this morning's services PMI numbers for January. France is expected to remain in contraction, at 48.6 and Italy is likely to disappoint at 48.9, and for all the optimism about Spain we saw unemployment rise by over 100k in January, in figures released yesterday, completely wiping out the sharp drop seen in December. EURUSD - the euro seems to have found a short term base at 1.3475/80, however the onus remains firmly towards the downside and a move towards 1.3300, with fairly strong resistance now sitting around the 1.3700 area. Last month's bearish engulfing candle on the monthly charts suggests the bias has now shifted towards the downside, and a subsequent retest of the 1.3000 level. Long term trend line resistance remains at 1.3865 from the all-time highs at 1.6040 and ultimately this remains the key obstacle to a move through 1.4000. GBPUSD - we've got our move to 1.6300 and we could well decline further towards the 1.6000 level on a break below 1.6250. Resistance now comes in at 1.6420 and the 50 day MA, but in order to stabilise we need to get back above 1.6510 argue for a retest of last month's high. EURGBP - yesterday's rebound has took us back to the 0.8330 level and could well see further gains towards 0.8380, trend line resistance from last August highs. To do that we need to break through the 50 day MA first, which we failed to do yesterday or risk a return towards yesterday's lows. USDJPY - this week's break below the 101.80 level took us through 101 and could well see further losses towards 100 and the 200 day MA as well as the 61.8% Fibonacci retracement of the 96.55/105.50 up move. Further losses remain the risk now, given the US dollar has posted its worst month since April 2012, and a bearish engulfing month. This would suggest we've seen the highs in the short term, and could be set for move towards 100.00 and 95.00. We need to see a move beyond 101.80 to suggest a move back towards 103.80. CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. 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