At Last Someone Agrees....

FUNDAMENTAL ANALYSIS
Market sold off today once again as Fed official Charles Plosser confirmed my Stagflation outlook on the economy and suggested that Fed fund rates should not be cut further. If you hit the "stagflation" tag beneathe this post, you can read my previous take on stagflation. In short, stagflation is a complex economic condition where growth is slowing to a still while inflation continues to rise. Indeed, headline inflation numbers have been rising throughout the year! More rate cuts would only mean more inflation while not attacking the problem of credit default at its heart! Furthermore, it does nothing to help the stock markets either! After 125 points rate cut over the past 2 weeks, the stock market's back where it started before the rate cuts! What we need in this economy is a good series of both corporate and individual tax break in order to improve growth and solve the credit default right at its heart! Hey, how about getting rid of the capital gains tax? Well, not only is stagflation a problem, getting a stimulus package out there is a problem as well. With the Senate stimulus package disapproved being 1 vote short, investors are beginning to see how hard it is for any stimulus package to hit the streets with the senate that we now have, adding further pressure to the already dismal sentiments in the market. All in all, those things that actually started this relieve rally are now shaky and investors reacted predictably by taking those votes back from the market. Fundamental outlook continue to be shaky in the US economy as too many plans have been proposed with no real solution and nothing that really addresses every single aspect of this complex economic condition. I still do not see a full scale bullish reversal in the near future.

TECHNICAL ANALYSIS
The Dow followed up on its 370 points ditch with another 65 points drop today. This has kept my technical outlook on the Dow the same as I proposed yesterday... a test of the January lows, failing which, this bear market will be going lower.

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