Snapback Rally

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Nikkei and Hang Seng up almost 2%, Euro Stoxx and Dax also up 2, with the benchmark Spanish IBEX equity index up nearly 3% — all apparently on hopes for the next bailout (not as suggested by Kernan on CNBC, the Walker recall vote).

US Futures deep in the green, with the Dow up triple digits.

At a lunch yesterday, I described why there was more work to the downside, but I didn’t dare get short for fear of some central bank intervention that could cause a 5-10% recovery rally (not in a single day, obviously). We haven’t gotten that bailout yet, but the possibility remains.

The key issue for asset managers of the tactical persuasion is whether this is merely an oversold relief rally, or the start of something more significant. The answer to that will be determined by the quality and participation levels of the move off of these very oversold levels. Watch the market breadth, the volume and where we close relative to the highs and lows for some small measure of insight.

Be back shortly . . .



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