Market Update - 2 pm

- NYSE volume 470M shares, about 25% below its six-month average; advancers lead decliners by 2.5:1.

The excitement generated this morning by the ‘lower than expected’ inflation data is a death march to the slaughter house for the bulls. What the Governments data this morning has done is further reduce the spending ability of millions of Americans. Remember that Social Security payments are adjusted for cost of living adjustments. And that adjustment is for the most part based on the consumer price index data.

Retired citizens, living on social security, and are paying much more in real life for food and heating/gas will be further squeezed into having to make a choice of whether to eat or buy medicines. Just because the model that the Government uses to calculate inflation does not reflect reality. The model is broken, period.

So what happens next? The government gives the market a boost by surprising it with lower inflation data. But, soon the people who need COLA adjustments will be further in the hole. So much for consumer spending coming back to life. It is completely amazing how the Government statistics disguise the real economy. And, please don’t tell me that it all comes out in the wash eventually. What happens it that it does come out eventually, but not cleanly, it comes out dirty and ugly as the implications of the data has a “real” impact on peoples lives. I will have more on this subject tonight.

Right now, be very careful thinking that this is a time to go long. This rally is dangerous to think it is safe to go long, on the contrary… it is leading to one of the biggest market sell offs we have seen in a great while.