For a stock market that was supposed to be merely marking time yesterday, the hundred-point gain achieved by the Dow was pretty impressive. We expect stocks to ease moderately this morning ahead of the latest credit loosening, and possibly to fall on the 'news' itself, since there is almost no possibility of a bullish surprise. After all, what would it take to surprise anyone? A 100-basis-point cut in the federal funds rate? Bond traders have priced in a nearly 90 percent chance of a 50 basis-point cut, so the only surprise we could imagine would be if the central bank were to offer up only half that. In the unlikely event this occurs, look for T-shirts with a silkscreen image of Helicopter Ben and the message, 'My banker went to Davos and all I got was this lousy T-shirt.' But the knee-jerk selling of shares is likely to be short-lived in any case, since only those who are long gold or short dollars could be caught fleetingly off guard by an uncharacteristically stingy Fed move. Once the dust has settled, though, we predict that all trends in force before the announcement will resume in earnest: stocks up, Gold up even more, and the dollar down. If so, we are not unskeptically bullish on stocks, only somewhat bullish on them for the near term. Still, we'll be rooting for higher prices like most everyone else, since that could give us the opportunity to short losers like Citigroup at fat premiums. Indeed, financial stocks in general have helped to drive the short-squeeze, and some stocks in particular, such as Merrill Lynch, appear to have considerable room left to rally. Meanwhile, the longer bears remain dubious, the more punitive the finale to this rally is likely to be. To accurately gauge its staying
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