Is This Rally For Real?

The Dow is shaping up to have its biggest ever monthly October gain in the history of the Dow. The question traders have to ask themselves, is this for real and should I get long this market.

Everything was sparked off late last night when the powers that be said that they thought they had an agreement with the banks to take a 50% haircut on their bond holdings. To put it in simple terms if you have something worth $10 on your books it was now only worth $5. And that's a relative term as there is no real trading market for these bonds at the moment.

The sharp upward move in October came as a surprise to many professional traders as well as hedge fund managers. Today's action was largely a squeeze play with the shorts getting squeezed out of their positions forcing them to buy back at higher prices.