Dow jumped 16% after hitting a new low on Nov 21, 2008 @ 7478 and managed to close at 8719, even though there are a lot of bad news on the economic fronts. Terrible durable goods, Purchasing Manager Index and personal spending - all points to deep recession and missing estimates too. The consolations were initial claims and personal spending better than consensus. Still, after 3 days of solid rally, news like this should pull back a bit. Scratching your heads?
It is seems like the market is baking in this:
(WSJ)On average the 54 economists surveyed expect gross domestic product to decline 3% at an annualized rate in this year's fourth quarter. That comes after the Commerce Department reported a 0.3% drop in the third quarter. Another negative reading is forecast for the first three months of next year with an essentially flat reading for the second quarter. Slow growth is seen for the second half of 2009, reaching 2.1% by the fourth quarter.
"By the third quarter of next year a recovery will be under way," said John Lonski of Moody's Investors Service, but he added that expansion won't return to pre-crisis levels until 2010.
As long as GDP contraction is not getting worse than -4%, expectation wise, they are giving a chance to the market until mid-2009.
So, like most says, the market is so oversold - there is a good chance of a rebound between 20 - 40% between now till March 2009, from 7478. Watch out for 9000(yellow light) and 10,000(red light).
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