We got proof that lots of investors believe in the rally, and many are predisposed to buying the dips, but the rally on Wall Street was driven by good news for banks. The US Treasury Secretary Tim Geithner told US politicians that most of the banks are well capitalised and that was well-received by the markets.
Importantly, the volatility index, or the fear index, dropped below the 40-level, which the market has struggled with recently to end at 37.
Adding to the good story was Yahoo reporting better than expected in after hours trade where their shares headed up.
Despite the general feeling that most companies are beating analysts’ expectations and guidance tending to be cautiously positive, there are still persistent claims from doomsday merchants that this is a suckers’ rally.
As I repeatedly say, if this rally dives but bounces well off the old 666 level on the S&P 500 then it is more likely that a bull market phase can start. In fact, the current rally could be the beginning of the running of the bulls, but there are still a number of question mark areas that could surprise the market.
On the other hand volatility is heading down and credit market spreads are narrowing as economic readings get better and more bear commentators are turning into bulls.
The Oz dollar is 71.16 US cents, once again following Wall Street’s lead.
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