Sentiment is tense, investors are antsy, fundamentals are weak and volume trends are poor.

At times like these, bulls will grasp for straws, and that is when they look at the economy for help. Surely some hope could emerge there.

Or not. Most economists were expecting a -5.4% contraction in gross domestic product (GDP) in the fourth quarter. But the number came in at -3.8%.

Party time? Not so fast. Following a -0.5% decline in the third quarter, the October-December span was the worst shrinkage in the economy since 1982.

It gets worse if you ignore inflation: At -4.1%, the nominal GDP reading was the worst in 50 years.

The negative contributors were consumer spending (-2.47%), business investment (-2.19%), housing-sector activity (-0.85%) and commercial real estate activity (-0.07%).

Positive contributors included a shrinking trade balance deficit as imports fell more than exports (2.93%), an increase in inventories (1.32%) and government spending (0.38%).

Digging a little deeper into the numbers uncovers more weakness. The 1.3% benefit from inventory accumulation should be ignored because it's a temporary boost that will just amplify the coming manufacturing slowdown and pull down future GDP results.

MBA students call this the "bullwhip effect." It occurs when bad forecasting, a lack of coordination in the supply chain and management overreaction to economic conditions magnifies shifts in consumer demand.

Basically, companies over-ordered and while that was good for Q4 08 it will be bad for Q1 09.

The bullwhip effect will be especially strong given…