CORRECTION OR BEAR MARKET OR IS IT ONE AND THE SAME?

There are two camps in the market currently. Those who keep calling the bottoms and those who claim that we are in the bear market. What's the difference? All I know is that we are badly broken technically and most leaders have rolled over and have broken at least below 50 DMA and are flirting with 200 DMA. I think that today's benign action on low volume is more of a warning shot that should be heeded by both the shorts and the longs.

Markets have a tendency to act contrary to popular opinions. But what is popular right now? Is it that the market has bottomed and is ready for the next leg up? Or are we due for further pain and deterioration of market technicals and fundamentals? I believe that we are at about 50/50 in terms of popular opinion but everyone is scared. That however has not washed away complacency in the markets. Just listen to Ben Bernake, Paulson, and other "experts" who claim that we are fine and that the global markets are fine. If that is the truth, then can we adequately attribute last week's blood letting as just part of the over due correction? I can harken back to the 2000-2001 when the market experts advised everyone to buy on the way down, to cost average down, that the bottom has been reached, all the way down to the abyss. I feel that those type of psychology or denial is prevelant in today's market.

All of these views are my opinion and what I bring to the table with my experience in the market place. I see that the majority of the market players seem to favor short term correcdtion that was badly needed. Perhaps they are right. But popular consensus or psychology in times of disruption in the market trend is often wrong. As I have been saying all along, this is the market to get contrarian against the market gurus, against human psychology. It is the time to look fear straight in the eye and laugh in the face of seeming danger. It is at that moment, money is made. You must buy the weakness and sell the strength. That is, sell if you are giddy and buy when you are fearful.

You'll know that moment of fear because buying opportunity in this market comes with Armageddon like fervor with noises rivaling those of the valley of death, the groanings of thousands victims, the dark days that are promised to come. At that moment, you must take a deep breath, calm your nerves, and buy for short term scalp. Conversely, when the trumpets of Angels sound, when the music of harps rings so sweet, when the soothing words of perma-bulls ring all clear signal, that is the time to short and short heavily, for the market rewards those who are on guard and respect the "system".

My analysis of the market today is that the volume plays a key pivotal role. On Tuesday the market made first attempt at a rally. While the price gains were broad based and spectacular, the volume lagged. That means that it was day 1 of the "DEAD CAT BOUNCE". Today, the market action was unspectacular and mixed and many stocks gave back their gains on, again, low volume. The price breakouts were from laggards ;such Chicos FAS (CHS), ASSET ACCEPTANCE CORP (AACC). Another absolute leader Intercontinental Exchange (ICE) rolled over on three times normal volume and pierced the 50 DMA. ICE is arguably the "best" stock of prior market uptrend that started in July 2006. So this tells me that underneath this "relief rally" or "dead cat bounce (more like it)", silent distribution is taking place. It is not yet time to get long folks. Will this rally continue? Yes, I think we will continue to show some price appreciations but I believe that we will continue to see lower highs and lower lows in the coming days. Do not underestimate the significance of the subprime market and the rest of the mortgage lending industry. I do not agree with Alan Greenspan (where did this guy come back from anyways, I always thought he was buried with his retirement) when he predicts that the housing market has bottomed. This is coming from a guy who couldn't call a market top or bottom if his coke bottled glasses depended on it. So here's to you Mr. Magoo, lest you forget your "irrational exhuberance speech" that was 4 years too early, that the housing market has yet even began to bottom and that there is, unfortunately, more bloodshed and gnashing of the teeth to come. This will have global consequences.

There are some factors then that will contribute to continued market weakness.
1. US subprime and prime mortgage blow up.
2. Loss of global liquidity from rising YEN which will abolish YEN Carry Trades.
3. We should worry about stagflation and not inflation, which is worse I think.
4. Iranian menace and geopolitical instability.
5. Oil is rebounding, has anyone noticed this?

As always, I am looking to short BIDU, GOOG, CME, RIMM.