It will take more than a few rally bars to lift my sour mood after the tremendous damage done since August of last year.

We've fallen way too far and too fast to expect a sustained recovery in the months ahead.

In fact, it might take years, or even decades, before the world markets recapture the lofty price levels lost in 2008's big crash.

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What exactly isn't working these days and what will it take to improve my outlook for stocks and commodities going forward? Let me sum up my feelings in these six things I hate about the 2009 markets.

1. Speculation.

The speculators have vanished in recent months, after getting their heads handed to them in the October plunge. As a result, growth stories that would have triggered sharp rallies in prior years are being ignored and even sold aggressively. Seriously, how are we going to discover the next

First Solar

(FSLR) - Get Report

or

Google

(GOOG) - Get Report

if we're not willing to take a chance on the top story stocks of 2009?

This lack of speculation is especially painful because it's January, which marks the dead center of positive seasonality for chasing around the most exciting growth stocks. The void is telling us we're headed into a tough year, in which the top prospects in tech, biotech and energy won't get the attention they deserve from Wall Street or the investing public

2. Small Caps.

Traditionally, small stocks come into vogue near year-end and continue to attract buyers through the first quarter. We saw a few blips of this seasonal activity in December but interest has gone stone cold since. In conjunction with the death of speculation, small-cap apathy is a highly negative sign for the 2009 markets.

What will it take to wake up the

iShares Russell 2000 Trust

(IWM) - Get Report

from its deep slumber? For starters, I'd like to see average volume rise above levels posted in the fourth quarter. These big bars need to be matched by rally days that lift prices up to new highs for the year. Barring a miracle, I don't see that happening in the next few months.

3. Leadership.

Of course we don't expect leadership from market groups that took a beating in the second half of 2008, but, ominously, the few sectors that held up well through the downturn are showing little or no strength this January. Biotechs offer a perfect example. Not one big-cap member of the group is trading near a multiweek high.

This leadership vacuum is deceiving because we've had our share of one-day wonder rallies since December. However, whether it's coal, industrial metals or tech, every run up to higher ground has been met with an equal and opposite force that unravels the short-term gains and leaves bulls holding the bag on losing positions.

4. Transports.

The

Dow Jones Transportation Average

(^DJI) has been dropping like a rock for the last three weeks and is now testing its bear market low at just below 3,000, even though the major averages are holding well above their respective 2008 lows and showing no signs of breaking down.

This is terrible news because planes, trains and trucks tell us about the current state of American industrial output. Like the plunging banks, this canary-in-the-coal-mine sector is warning that economic conditions are deteriorating, despite the positive spin from Washington and Wall Street. The decline also predicts lower prices for the broad indices.

5. Liquidity.

This is a big one -- have you noticed how daily volume has been lower than average across the broad market even though January should yield the heaviest participation levels of the year? Where are all the 401k contributions, value investors, speculators and other folks trying their hands at the market casino?

Of course, most

RealMoney

readers already know the answer to that deceptively simple question. So much wealth was destroyed in the 2008 crash that surviving mutual and hedge funds, as well as individual investors, no longer have the deep pockets needed to play the financial markets with the same intensity as in prior years.

Leverage has also taken a major hit in this bear market, contributing to an illiquid environment that might characterize the tape for the next five years or even longer. Add in municipalities that can't afford to buy stocks anymore and we have the makings for ultra-wide bid-ask spreads and support/resistance levels that fail to attract buyers or sellers.

6. Machines

Finally, let's talk about program trading and the ultra ETFs. I'm squarely in the camp that believes these two factors, taken together, are destroying the fabric of the worldwide market structure. Beyond that, they've frightened away huge amounts of public capital that now believes they can no longer compete in the financial markets.

As far as I'm concerned, this is a clear case of manipulative activity that goes against overriding public interest. It's destroyed the auction place by creating synthetic market inefficiency -- i.e., the ability to control price direction through brute force. Sadly, I have little faith that our regulatory officials will ever comprehend the sinister power of these destructive bots.

Alan Farley provides daily stock picks and commentary with his "Daily Swing Trade" newsletter.

Know What You Own: Farley mentions Google, an Internet information provider. Similar stocks include Yahoo! (YHOO) , Baidu (BIDU) - Get Report, Priceline.com (PCLN) and Expedia (EXPE) - Get Report. For more on the value of knowing what you own, visit TheStreet.com's Investing A-to-Z section.

At the time of publication, Farley had no positions in the stocks mentioned, although holdings can change at any time.

Farley is also the author of

The Daily Swing Trade

, a premium product that outlines his charts and analysis. Farley has also been featured in

Barron's

,

SmartMoney

,

Tech Week

,

Active Trader

,

MoneyCentral

,

Technical Investor

,

Bridge Trader

and

Online Investor

. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks.

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