Bottom Calling Abounds

Yesterday's gains seem to have been met with plenty of bottom calling.  Granted, this is anecdotal evidence from what we've heard on CNBC and other media outlets on Wall Street, but it's important to remember that we're not out of the woods yet.  Below we highlight a chart of the S&P 500 and an index that measures the default risk that investors are placing on high-grade corporate debt.  As shown, the S&P 500 (red line) remains in a severe downtrend, and it has a lot of work to do to get out of it.  While the credit default risk index had a huge decline yesterday, it barely put a dent in the strong uptrend that it's currently in.  When the market gains 400+ points in one day, it's easy to selectively remember the good and forget the bad.  While we hope a bottom has indeed been made, it's still important to tread these waters carefully.

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