Market Reversal For The US.. Good Sign? Bad Sign?

The driving forces behind the rally are:

1) Oil prices have dived since reaching their peak at $99. Crude oil now stands at $88 and weakening further

2) Optimism that the FED will continue cutting interest rates this month by another 25-50 basis points

3) A freeze on mortgage rates: A formal announcement of the Bush administration’s mortgage plan will come Thursday, but media reports said it involves freezing interest rates on some subprime mortgages for five years in an effort to combat a soaring tide of foreclosures.

4) December is traditionally a rally month (Santa Clause Rally). It’s fair to say that a holiday rally is in full swing. Since the market bottomed on Nov. 26, the Dow has jumped more than 700 points, or 5.5%, and has seen gains in five of the last seven sessions. The S&P 500 is up 5.4% in the last seven sessions, and the Nasdaq is up 4.8%.

5) Good economic news yesterday on JOB CREATION (189,000 jobs were added in Nov compared to estimates of 77,500 jobs) and PRODUCTIVITY (productivity rose 6.3% compared to a 4.9% estimate) shows that recession talk was overdone and it is highly unlikely the US will go into recession.