Kass: This Is Just the Eye of the Storm

This blog post originally appeared on RealMoney Silver on Nov. 28 at 7:59 a.m. EST.

It doesn't get better than yesterday.

My expectation for a strong market close was accurate, and is probably setting the stage for a good close to the month of November as the year-end rally that I have forecast might have commenced.

Over the weekend, I received a number of emails from subscribers aghast at the notion that I can see a year-end firming in stock prices. (Isn't it ironic that this short-seller has to defend his momentary bullishness?)

• Stay flexible: One can't succeed by being dogmatic in the investment business.
• Game the market: In a period of substandard market potential, gaming 3% to 5% moves can provide investment outperformance.
• Turn chicken scat into chicken salad: We have to accept the hand that Mr. Market deals us. In the case of equities, the volatility provides all of us with marvelous trading opportunities.

Let me explain further.

The credit problems our system faces are real (and probably far worse than most have accepted), and expectations for economic and corporate profit growth are still far too optimistic. I have outlined, to the point of redundancy, the firming headwinds to the credit markets and to the world economies. More than many, I have been consistent in outlining that these risks of a transition from credit/debt accumulation to de-accumulation will be a painful deflationary process.

Nevertheless, there's a laundry list of concerns:

Fear is palpable (just look at this week's awful consumer confidence levels). ntiment is growing increasingly negative.

Business headlines are now dramatically skewed toward the credit problems just as some solutions are being entertained and we are beginning to wrap our hands around the problems, as we saw in the Abu Dhabi-Citigroup (C Quote - Cramer on C - Stock Picks) transaction, in the Freddie Mac (FRE Quote - Cramer on FRE - Stock Picks) preferred issuance and in the emerging potential solutions regarding the structured investment vehicle problem.

And America is on sale -- I fully expect several high-profile cross-border mergers, similar to the Philips (PHG Quote - Cramer on PHG - Stock Picks)-Genlyte (GLYT Quote - Cramer on GLYT - Stock Picks) transaction, over the next several months as regions with appreciated currency prey on our depreciated assets.

Importantly, late November and the month of December have historically strong seasonal influences. November represents the fiscal year-end for many mutual funds and a period when hedge-fund investors can declare year-end redemptions. This all encourages markups. And with December having strong seasonal patterns as well, the market's oversold condition could be a bullish short-term setup.

In summary, in the fullness of time, the markets are likely going lower -- much lower. We face a recession and a disappointing profit picture.

But for now, the skies are getting brighter.