Well I was right, but not right enough! My estimate of a 6.5% gain, which would have been one of the biggest in the last several decades, was far too conservative. Instead the S&P 500 jumped well over 10%. I had figured the jump would be from 5-10%, with 10% a possibility but not that likely, and surpassing it? Not a chance, right? The coordinated action by Europe as well as the Morgan Stanley deal really juiced the market on Monday. Even without it, the market was due for an upside explosion. With it, the surge became the biggest one-day jump in almost 70 years.
Today's action isn't unexpected either. Two conflicting factors were at play. 1) Follow-thru from yesterday's surge, and 2) profit-taking from yesterday's surge. We are almost certainly at a temporary market bottom. The direction from here is up, for at least a few months. But I don't think it lasts much longer than the end of the year, and indeed we may drift back to test the lows by then even.
So today jumped 4% and settled back to par, thus satisfying both factors, followthru and profit-taking. Overall I think this week should continue upward though, with people putting money back into stocks in their 401K that they moved out fearing a crash on Monday or heeding Jim Cramer's call sometime last week. Those that heard him on Monday and moved immediately into cash for Tuesday, then moved back into cash Monday (so they were back into the market today) probably broke even. But I'm sure many more waited and watched the rest of the week before deciding on Friday to move to cash, thus taking all the hit while missing yesterday's surge.
That's the problem with listening to gurus: people inevitably want to wait a while to digest their recommendation to see if it's coming true before acting, so even if the guru is right the waiting kills you. And if he's wrong you get killed anyway.
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