Stock Market Rally - What's going on?

The present stock market rally is the steepest since 1933 and has gone over four days. Have we bottomed? NO. All of the earnings and turnover data is dire. This is an engineered rally, by the PPT, possibly to help support the banks (when stocks fall banks solvency is reduced). It is neither a good thing nor a bad thing (unless you were short before the rally and haven't closed your position). If you have been sitting on shares waiting for some recovery, this might be your last good opportunity before the next sharp leg down. We are looking at the S&P going to the low 700s before we have any hope of finding a bottom. At the time of writing this, the S&P is at 888.

To support this view, look at LIBOR, which remains high, yet more market stimulation, this time in the EU, and notice that oil is still down in the low $50s where it has become range-bound for a while. Meanwhile, gold remains firm.

It will not be long before commodities rise again as inflation kicks in and the value of the USD falls against commodities and other currencies, particularly the EUR and GBP. I am not as pessimistic about cable (GBP) as most other commentators seem to be. True, the UK is in a terrible pickle and the economy is being badly mismanaged by Mr Brown and his Chancellor, Darling, but then again, that is true of the USA and all other EU countries. No country seems prepared to bite the bullet.

I am watching constantly and will update again when I have something useful to add. We are in the fiercest financial storm ever seen on the planet and it is impossible to predict the outcome with any certainty. The best we can do is determine the approximate direction and speed but timing is particularly hard to judge. To a great extent, the timing will depend on how long the politicians can keep the public confidence of the banking system. If that goes, the entire structure would fall down with fearsome consequences.