The U.S. stock market had its biggest two-day advance in the last five years, sending the
S&P 500 up 4.4% since Tuesday. The questions investors are asking: Will this trend
continue, and is now a good time to get on board for an end of the year rally?

To answer those questions, I always turn to the fundamentals and ask if the market is
cheap or expensive at this juncture. With 90% of the S&P companies now reporting, it is
clear that not only is there a recession in homes and autos, there's also a recession in
overall earnings growth. Operating earnings for Q3 were down 8.5% from Q3 of 2007.
With the market now trading at 17.26 times earnings, stocks have yet to price in a
continued contraction in earnings growth in 2008. In fact, according to MSN, major banks
have managed to ignore the economy's precarious position and still presage an increase
of about 15% to 30% profit growth next year. That ebullient prediction ignores the absence
of capital available to banks and consumers to keep the economy growing.
Why the continued optimism on Wall Street? My guess is the reliance on...read more Is
the Rally for Real? at GreenFaucet.com

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