Just Your Typical 376 Point Rally in 49 Minutes

Volatile doesn't even begin to describe the insane 376 point rally at the end of the session on Tuesday. At least for now investors are saying that they reject the breakout to the downside we saw on Monday. So likely we are back in the range that has been in place since early August.

The most striking thing about Tuesday's action was the supreme outperformance of smaller and riskier stocks. This can be seen very clearly by the Russell 2000 index rising nearly 3X as much as the large cap oriented S&P 500. This was a major reversal of the "flight to safety" trade that levied much harsher punishment on those same R2K shares.

What happens next is much more interesting than what just happened. Meaning, is this just a quick relief rally before we retest the lows again? Or was that a capitulation rally that marks a bottom for a renewed and lasting bull run???

I am guessing this bounce may have a little more legs before we are right back here testing new lows. Something tells me that we have to reach Dow 10,000 at a minimum before the beast is satisfied. And if a real recession is coming, which I think it is, then Dow 10,000 would be the ceiling from which we seek an even lower floor. The fresh jobs data on the way this week may hold some clues.

Featured Commentaries on Zacks.com
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Best,

Steve Reitmeister
Executive VP, Zacks Investment Research

Today's Top Stories: Wednesday- October 05, 2011

ZACKS RANK BUY STOCKS

• Aggressive Growth - Pinnacle Entertainment (PNK) earnings came in at $0.17 per share, up from a $0.33 loss a year ago and 9 cents better than the Zacks Consensus Estimate. Pinnacle now has 4 consecutive earnings surprises. Read More...
   
• Growth & Income - Ventas, Inc. (VTR) now expects 2011 FFO per share between $3.17 and $3.23, up from previous guidance of $3.06 to $3.14. Analysts revised their estimates higher for both 2011 and 2012. Read More...
   
• Momentum - Cash America Int. (CSH) saw some solid movement in estimates off a good quarter, with the current year adding 14 cents to $4.41 while the next-year estimates gained 19 cents to $5.09, a bullish 15% growth projection. Read More...
   
• Value - Lindsay Corporation (LNN) Zacks Consensus Estimate for fiscal 2011 has risen to $3.09 from $2.97 a share and has stayed there. That is earnings growth of 56.1% over fiscal 2010 when Lindsay made just $1.98. Read More...
   

Learn how to profit from our exclusive Zacks Rank stock-ranking system with free resources. Read More...

• Top 5 Putnam Mutual Funds Read More...
• Mutual Fund Homepage

• Bull Of The Day: Plains All American LP
  Full Zacks research report: Read More...
  
  
• Bear Of The Day: Federated Investors, Inc.
  Full Zacks research report: Read More...
  
  
• Ahead of Wall Street
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• Zacks Industry Outlook: Insurance Industry Stock Update - Oct. 2011
  Though financials of U.S. insurance companies are still not strong enough to soak up losses from catastrophic events, tight market conditions and a favorable rate environment on steady demand growth could significantly offset the damages. Read More...
  
  
• Analyst Blog Highlights
• Noble Reallocates Drilling Rigs (revised)
• SBS Upgraded to Neutral
• FDA to Respond to Bristol-Myers Drug
• Full Analyst Blog

INVESTMENT IDEAS: 4 Companies with Rock Solid Balance Sheets

While hoarding cash may draw scorn from politicians and shareholders now and then, sometimes it's best for businesses to play it safe. Read More...

• Aggressive Growth Stock Picks-Oct. 4, 2011
• Value Stock Picks-Oct. 3, 2011
• Recession & Bear Debate

PeopleAndPicks.com:

VIP "InvestmentMAGE" is carving out double digit returns with his BUY calls in (AMR), (MCO) and (UA). Read More...

• Europe bank fears rattle world markets @ CNNMoney.com
• Retailers Revive Layaway to Entice Budget-Conscious Shoppers @ FOXBUSINESS.com
• U.S. stocks rally in bank-led reversal @ MarketWatch.com

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