Kass: It Ain't Heavy, It's a Bottom

The spring should be characterized by a backing and filling as the sharp gains are digested, similar to the the September-October 1938 interval. Sloppy second-quarter warnings will weigh on the market during the April-May period, but the markets could move sideways, bending but not breaking. Signs of market skepticism, sequential economic growth and evidence of a bottoming in the residential real estate and automobile markets (after a sustained period of under-production) could contain the market's downside, providing a range-bound market with a firm bid on dips. As well, the results from the bank stress tests and the release of a more coherent and detailed bank rescue package could provide further support to equities.

By June, economic traction should begin to take hold from the accumulated fiscal and monetary stimulation coupled with the large drop in energy prices. While it will be too early to demonstrate a broad economic recovery, evidence of stabilization will be clearly manifested in improving retail sales, and stocks will take off for their final advancing phase. With fixed income under increasing pressure, large asset allocation programs at some of the largest and late-to-the party pension plans (out of bonds and into stocks) could trigger an explosive rally in the middle to late summer. This move by July or August could close the October 2008 gap in the SPDRs at around $107.

Doug Kass writes daily for RealMoney Silver, a premium bundle service from TheStreet.com. For a free trial to RealMoney Silver and exclusive access to Mr. Kass's daily trading diary, please click here.

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Know What You Own: Doug Kass mentions the financial sector, and some of the stocks in this field include JPMorgan Chase (JPM), Wells Fargo (WFC), Bank of America (BAC), Morgan Stanley (MS) and Goldman Sachs (GS). For more on the value of knowing what you own, visit TheStreet.com's Investing A-to-Z section.

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