Stocks forged a tall candle today, surging 7% higher after the Treasury followed up Berskanke's plan last week to put the burden of Wall Street malfeasances squarely on Main Street. On the technical front, any chance of seeing a prompt return to lows was shattered. We are now clearly in the midst of the major counter-trend rally of this bear market. Being a counter-trend rally, it is corrective. We will eventually see new lows in this bear market after the correction is over.
Curiously, today's surge came on lower volume, indicating that a pull-back is imminent, but this rally is doing what bull markets... and major counter-trend rallies... do best: they surge higher into extreme overbought conditions thereby locking out the latecomers and squeezing shorts.
I'm going to cut this post short since I'm a bit under the weather, but first a reiteration of a point made yesterday: the length of corrective moves tend to be proportional to the move they are correcting. It makes sense for a 12-week rally, for example, to be corrected by a 4-to-6 week pull-back. However, an 18-month wave will not be corrected by only a 4-to-6 week move. I expect this move to persist through summer and perhaps through the end of the year. I suspect we'll see a 4-digit S&P 500 print before it's all over, as well, but we'll just read the tea leaves as they come.