Who would have thought that with housing in its worst shape in many decades, credit locked up tighter than its been in 20 years, job growth barely enough to sustain the economy, and a declining GDP, that the markets would pull off a successful V bottom?
With the DOW and the SPY closing above their major moving averages, and the Nasdaq set up to regain its 50 day average very soon, there is not much left for a bear to hang his (ass)hat on. Honestly, there are only two elements remaining about this rally that leave room for doubt.
The first is volume. Volume across the board has been declining as the market moves higher. It is important to note that volume in August was also slack but did not stop the market from continuing much higher. Generally, declining volume in a rising market is bearish.
The other technical element which casts a shadow of doubt on the rally continuing is that the indexes are becoming overbought. However, it is entirely conceivable that this condition gets worked off over the next few days, just in time for a huge Fed rally on December 12th.
While the bearishness has almost been beat out of me, I’m not yet ready to go long here. In four days, the Fed will report, and the market will once again be allowed to trade fairly unencumbered by Helicopter Ben and Dubya (This is NOT a Bailout), at least until the next crisis.
I still believe there is money to be made on the downside. As I have outlined, the indexes have reached their honey holes, and while it seems insane to short here, If you want to sell high, and buy low, now is the time.