Dead Cat Bounce Starts....

FUNDAMENTAL ANALYSIS
More good news today gave fuel to the bulls, bringing the Dow up another 108.44 points. Jobless claims are down another 75k and earnings have been hot hot HOT so far! We also saw a return from bonds back into equities as bond yields rise across the board. On top of that, institutions are also increasingly bullish as indicated by my proprietary Institution Sentiment Meter as funds started moving in to take up positions for the year. On top of all these, a proposed bail out of the bond insurers gave lift to the financials across the board. Short term prospects does look good for the market right now especially with oil prices this low relative to where we were a while ago. The long term still looks bleak as there are certainly many plans to get out of this crisis but nothing firm and no real results yet. The market is also pricing in a 50 basis points cut next week. A 50 basis points cut would definitely help get the economy out of the subprime mess from the bottom up and the bottom is where the real problem lies. Well, with the regulators in such a state of panic, it does hint at more problems to come and yes, this crisis is still far from over but when the end if near, we can be sure that the stock market, as a discounting mechanism, would price it in way beforehand.

TECHNICAL ANALYSIS
Today's a feeble follow up to the nice reversal signal formed by the dragon tail formation 2 days ago. However, with the signal formed up and followed up so nicely, there seem little reason why we should be skeptical, at least for the next few days to a week. As for tomorrow, well, I would be skeptical that the market would go up significantly for a third day in this weak market. 3 significant days up are really rare even in strong markets. By significant day, I mean anything more than a 50 points move up in the Dow Jones.