Do Not Buy This Bounce!

Tomorrow 3/16/2007, the markets should try to extend their gains today, emboldened by the dramatic turn around on higher volume today. This would count as day one of the attempted rally after the sell off on Tuesday. Many will probably proclaim that the bottom of this market has been achieved. Notably, if you have access to thestreet.com, please do not heed Cramer's advice. He has called too many bottoms recently and all of them have gotten his readers into trouble.

Asian markets are rebounding in sympathy to our markets. That should start a chain reaction in our markets tomorrow. As I have always said, "sell the strength and buy the weakness" in this market. Volatility and trend is your friend. Nothing other than shorting to the downside for the long term (more than 3 months) will work. But staying in cash and protecting your capital is probably the best idea right now. There are some exciting shorting opportunities available especially if the market bounces again tomorrow. But please keep your eyes on the price volume action. The market rebound today was impressive but it is nothing to write home about in terms of reversing the down trend. Right now, we will continue to have fall outs from subprime mortgage markets but we should also keep our eyes and ears peeled for issues associated with prime mortgage markets as well, especially with the (ALT-A Mortgages). Good short candidates are: CME, AAPL, GOOG, BIDU, CME, GS, LEH, MS, RATE.

PPI numbers will be released at 8:30AM EST. Market expects PPI to be 0.5% and core PPI to be 0.2%. Producers Price Index (PPI) is not that important but the markets will focus on it because everyone is trying to hold on to some bastian of hope. Longs and shorts alike will spin it anyother way. Unfortunately any effects from PPI report will be short lived and may cause short term volatility but nothing more. This is because PPI is a lagging indicator and is affected by many biases and adjustments. If PPI comes in higher than forecast, it will stir inflation worries again but the markets may actually applaud this in the short term due to easing of "recession" worries tied with current housing market debacle. If PPI comes in lower than forecast, it will stir recession worries and the markets may sell off on this news even though interest rate cut hopes will rise. That would be my guess, but it is only that.

I am looking to add to BIDU or CFC puts based on which stock is rising. Good luck everyone. Investigate everything and trust no one.