Measuring the market

This could be an ugly day, as short-term investors start cashing in on the gains of the past week or so. In early trading the Dow was down about 130 points. Economists insist that stock market performance has little to do with the performance of the economy, but it seems pretty obvious that with Wall Street being a kind of daily financial scorecard, Main Street people are a lot happier - and a lot more tempted to go out to eat or buy a sweater - if the Dow is up 400 points rather than down 400 points. Meantime, there's still a lot of skepticism about whether the current rally - the strongest since the bear market arrived in October 2007 - is likely to last. From the WSJ:

Many money managers and analysts worry this could turn out to be a temporary rally in a longer-running bear market. They see signs the gains are fueled largely by short-term investors who want to ride the rally but are poised to jump out at the first sign of trouble. Richard Steinberg, who oversees about $380 million at Steinberg Global Asset Management in Boca Raton, Fla., began buying stocks in late February and early March, figuring the market was near a temporary bottom. He was right. But this week, with stocks on a rampage, Mr. Steinberg put on some bets against the market in a belief that the rally had come too far, too fast, and was running its course.

[CUT]

Many investors think the current U.S. rally could last longer than previous ones because buying demand has been so strong and stocks were beaten down so far. Truly bullish investors -- and there are a growing number -- think the bear market is ending. In a contrarian way, they believe that all the skepticism could actually be a good thing. The bulls think the doubters gradually will be won over and move money out of their cash reserves and into stocks. Even if it isn't long-term, the rally could last several weeks, says Phil Roth, chief technical market analyst at New York brokerage firm Miller Tabak + Co. "I don't think you can have a new bull market without longer-term investors, but you can have a heck of a rally," he says.