Interesting times.

The S&P 500 is now up nearly 100 points or 11% in a matter of nine trading sessions. Short-term, the market may be getting ahead of itself as bullish sentiment are just as high today as the Bears were confident a few weeks ago. This market has been notable for its head fakes, so it will be interesting to see if the indices can hold on to their gains.

Better than expected second-quarter earnings numbers have consistently been a product of lowered expectations and sharp cost cutting, i.e. job cuts. Generally, cost-cutting has successfully improved bottom-line results. Despite shrinking topline sales. The bad top-line/good bottom-line theme has been very consistent in the second quarter reporting period. While the headlines have been bullish, there are still plenty of question marks for the economy moving forward. The biggest question mark for the stock market is whether Corporate America can still grow its bottom line in a weak economy without resorting to further cost-cutting measures, job cuts etc. Or, will topline continue to shrink along with the economy and lead to disappointed investors in the future quarters?

Given the way second-quarter earnings have played out, my focus going forward will be on the health of the US economy. It doesn't take a rocket scientist to know that stocks will not do well if we continue to have higher unemployment rates, slowing business activity, and rising costs a.k.a. government spending and tax hikes. It will become obvious if we are in the second leg of a new bull market, or if we simply had an unmistakable head fake where we will go to new lows in the markets.

Tell me what you think?