Has the Market Bottomed

Just two days ago, the champagne corks were popping (at least among those who can afford champagne these days!) as the market soared. Then, one day later, even amidst an interest rate cut from the Federal Reserve, the Dow was down again.

So what are we to make of Tuesday's 884-point gain, the seventh such daily 10% gain in history? Here's an important perspective:

The first thing you should know is that three of those seven 10% up days came during the 1930s and four of them, including one just two weeks ago on October 13, were all wiped out in the lingering bear market.

Sharp rallies are characteristic of a bear market, but the problem is, they don't last because the economic news is dismal. You can be pretty sure the market will head back down when there are no convincing reasons for market gains.

That's the case right now. Just take a look at some of the other developments going on as everyone is quick to jump on the "we've hit bottom" bandwagon:

• This week's monthly measurement of Consumer Confidence came in at 38.0 for October, the lowest number ever seen since the Conference Board began tracking this measure in 1967.
• 37.2% of Americans believe that jobs are hard to find, the highest number in 15 years. Just ask recent college grads!
• The housing market, as tracked by the S&P/Case Schiller home price index of 20 large cities, showed a decline in home values of 16.6% in August…another record!
• Meanwhile, back at the Treasury Department, the panicked decisions continue apace, with yesterday's announcement of a plan to bail out homeowners facing foreclosure and the possibility of $5 BILLION bailout of GM. If that's not enough, the private equity fund (Cerberus) that bought Chrysler is begging for a handout, too.
• Lest you think that the Federal Reserve Bank is any less panicked than the Treasury, yesterday's one-half percent cut in short-term interest rates confirmed, yet again, the lengths to which the Fed will go to try to prop up the stock market. By the way, don't expect the interest rate on your credit cards to go any lower with this latest cut. Many cards have already hit the "floor" set by the provider.

Next: What to Do Now