Last Week's Rally, This Week's Caveat

The ease with which the Dow Jones Industrial Average and the S&P 500 moved to two-week highs, rising each day last week, brings to mind the effortless performance of some of our greatest athletes -- Magic Johnson in basketball, Tiger Woods in golf, Willie Mays in baseball, Walter Payton in football.

Before Friday's employment number, stock pundits were once again paralyzed with fear, intoning that no one wanted to take a position before the announcement. But the day once again witnessed a heroic rally, with the Dow jumping 202 points and the S&P climbing 27.

As we've said before, it's so easy -- from the halcyon vista of the armchair or the solid support of the cane -- to buy when the eye of the hurricane hits. Buy on the beaches, buy in the streets, buy in the air and -- if by some improbability the Nasdaq does go down someday -- buy then especially, because there's sure to be a rally. The Nasdaq rose only three out of five days last week, ending up 7% on the week and 20.7% on the year.

The 72-point bounceback in S&P 500 futures last week was the third-largest rebound of all time, placing it in the pantheon with the weeks ended July 2, 1999, and Oct. 16, 1998. Such events are unfortunately relatively bearish; the indices manage to sustain their levels one week later only one-third of the time, a low enough degree of uncertainty to border on the typically used standards of statistical significance. ...