Put on your rally caps, friends, we're goin' for a ride! I expect the stock market bounce that began today to be a nice, sustained Sucker's Rally, possibly up to around DJIA 8,800 or so at the very least (this is NOT trading advice, just speculation on the direction of an index) over the next few weeks or so.
These kinds of ferocious rallies are common during bear markets. I wouldn't want to be short right about now, but that is just me.
I expect the mood that drives this rally to be almost manic in its insistence that "the bottom is in" or "we've washed out the weak hands finally" or some such phrase that will be picked up and shoved into our brains via teevee, radio, newspaper and "spontaneous" email chains.
A manic positive mood might lead to:
- Suspension of "mark to market," in which by removing the stethescope and unplugging the diagnostic equipment, we create a condition of non-illness. It worked for Enron!
- "Earnings Surprises" from some banks and finance companies (of course, everyone will remain quiet about their Level 3 assets and the cratering of their customers' balance sheets)
- "Real Change" via something like movement on a Federal health care bill, or maybe excitement over the proposed education bill and the sense that the worst is over for the economy and "yes we can" move on to more exciting ways of blowing America's few remaining shekels.
- A more "in your face" approach by local officials and people who still have jobs that "things aren't as bad as the bad, bad media make it out to be!" Enjoy it.
We are getting a gift here folks - one last surge of positive mood before we waterfall over into the next wave down into a swamp of negativity.