LCACM

Oversold and Melting Up

Wall St. moves are due to fear and greed. Both these are destabilizing forces. If there is a sudden gust of fear due to some unforeseen events, the fear feeds on itself and generates even more fear. Similarly for greed,. The current crisis was precipitated due to government inaction when there was too much greed in the housing/banking sector. As elections are approaching and Paulsons friends are losing their jobs, the US Admininstration decided to act, and convinced other countries of the necessity to do likewise. As in navigating an Airliner, the Autopilot (Free market) does a pretty good job of navigating the plane during much of the flight. In tricky situations such a landing or takeoff the Human Pilot takes over.
The markets rallied realizing that the Pilot (US Administration) had finally woken from it's slumber and were prepared to land the plane safely instead of crash. There are still dark economic clouds on the economic horizon, so bumpiness is expected but not a fiery crash. After landing whether the economy takes off as scheduled depends on whether the next US Administration believes in taking over the control for the TakeOff Phase or is too lazy and lets the AutoPilot do the takeoff. The US economy definitely requires US Administration help to takeoff. After TakeOff the Free Market can takeover till it is time for the next landing.