New York markets surged today on renewed optimism that further global cooperation between governments and banks could avert disaster and minimize the damage from an imminent recession. The Dow closed up 936 points to 9387 while the S&P rose 11% to end the day at 1003. The rally built upon gains made in other world markets as the Nifty closed up 6% to 3490.
While I expected a rally to occur in the next couple of weeks, this explosive rise caught me totally off guard. I think we will likely see more upside tomorrow but watch for more tentative rallies later in the week with a negative close by Friday. Next week looks more negative than positive, although there will be at least two up days.
So everyone is asking: have we seen the bottom? I would say no. From a technical perspective, the relatively low volume of 1.5 billion shares is a clue that this is not a durable rally. I think this rally may top out at 9500 to 10,000 on the Dow, (perhaps 3800 on the Nifty) but we will be headed down soon enough. Watch for the low to take place in the first week of November. It may well be a retest of the Friday low, although I'm not certain of that. Another possible retest will occur in the first half of December.
