Up, Up And Away

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A long overdue market rebound generated euphoria on Monday, as governments around the world pledged to inject new capital (with no limits) into banks and financial institutions in an effort to ease the credit crunch.

Market reaction to the upside was fast and furious as the graph on the left shows. Take a look at the numbers, as this may have been a once in a lifetime type of recovery. The move was somewhat distorted due to banks and the bond market being closed for Columbus Day.

While excitement about the rebound was widespread, it does not mean that a new uptrend has been signaled. It will take a lot more then one feel-good-day to resume consistent upward momentum. One economist put it best when he said that “the G7 announcement was “fluff — good fluff, but fluff.”

Our Trend Tracking Indexes (TTIs) rebounded, but are still deeply entrenched in bear market territory:

Domestic TTI: -12.75%
International TI: -20.67%

Expect continued volatility as the underlying problems with housing, consumer spending and the wide open question as to whether these widely announce plans will actually work are bound to be moved to the front burner again. Yes, and earnings season has started, which has always market moving potential. Stay safely on the sidelines.

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