Big move

After massive interventions at all levels of the financial infrastructure, the market displayed its oversold power and had a gigantic rally, the 2^nd best on record. Many of the articles cited an impending Fed interest rate cut as the primary driver.

I don't think the Fed should cut until they absolutely have to and I don't think they absolutely have to. I don't think it's affecting lending anyway. It's a token. The market is really expecting it – fed funds have a ½ a point cut factored in and investors would be very surprised if they didn't – and I don't think the Fed can jeopardize the market's tenuous hold here. They probably will cut… but they shouldn't. They and the Treasury have completely flooded the system with liquidity through other means.

I think yesterday's rally had most of the earmarks of a bear market rally. They may carry further. The VIX remains stubbornly high. I think the market moves lower over time but for the time being the low price/earnings ratios make stocks appear attractive. Prices look great. The problem, I think, is that earnings estimates are complete fiction, based on economic forecasts that have no validity in the current environment. I see modest upside to the market here – maybe 6% to about 9700 in the DJI. Downside target remains under 7500, which is now a 17% move if it happens.