The CAT IS DEAD!

It put up an admirable fight but the cat was finally vanquished today. The complacency that I have been alluding to regarding the still bullish market players has lead to this death. The writing was on the walls well before this sell off and those who went to cash or went short during this short unimpressive rally is doing well. Unfortunately, I fear that many people lost a lot of money today.

There was no denying it. It was an utterly ugly action today. Many market gurus were calling for a bottom last week and encouraged people to buy the "dips". As I said all along, this is not a market to be buying. The trend is your friend.

The ramifications of the sub prime market meltdown is not an insulated event, as I have said before. This market has quite a ways to go down before we find the bottom. I don't think this is a garden variety correction. The economic impact is significant. I have laid out my thoughts on why subprime market meltdown will trigger a domino effect on the economy and will definitely pull us into a recession. But more concerning is the possiblity that a "stagflation" may be imminent. The premise of stagflation is rising inflation and stagnant economic growth. We may be headed into that abysmal realm soon. I hope not but it is a distinct possibility.

I would be picking at a good entry points for shorting the market right now. As I have always said, Google and Baidu were perfect short candidates. I am working on Apple and Countrywide Financial (CFC) right now. This market has ways to go down so keep the shorts on or stay in cash. If you do decide to go long, make sure that the temporary downside is met with the "dead cat bounce".