Stock Market -- Short Term Perspective

Today's big up move extends the market's instability.

Can there be a "V" bottom -- a one day lead in to a positive
move without a retest or a period of base building? Sure can.
It is an against the house bet, but not a foolish or even
unreasonable one. Note though that investors have tended to be
more circumspect about jumping long on a significant dip since
the 2000 - 2002 bear.

The market remains oversold in the short run.

The market is also in a seasonally weak period, with sharpest
risk coming up over the second half of this month. Interestingly,
since the market nearly made a double bottom in early 2003 before
the big take-off, it is worth remembering that the four year cycle
low could occur in early in 2007 rather than 2006 as most players
had previously expected. If so, the SP500 could easily fall another
7-8% over the next several weeks. Cycles are usually too imprecise
to warrant being dominant in one's thinking, but the savvy player
keeps aware of them.

As I have said since near year's end, I am in 100% cash equivalent
because I seek some resolution regading how the economy might play
out over the eighteen odd months. I am not bearish, just cautious.
During periods like this, I usually sequester the spread between the
short rate yield and the inflation rate and play the options market
at hopefully opportune moments.