Beware of the bear.

Traders say the stock market looks better; acts better and feels better, and might actually be on an uptrend, for now. Stocks have gained more than 6 percent in the past two sessions, and major indices are up about 20 percent since the Nov. 20 closing low.

But they also say this upswing has all the feel of a bear market rally, and it could easily turn around and bite you. Already after Monday's bell, two major companies - FedEx and Texas Instruments - reminded investors that earnings estimates have been too high and will continue to decline. FedEx shares slid after it cut full year profit expectations, saying package delivery demand is dropping. Texas Instruments pared back its expectations for profits and revenues in the fourth quarter and said it was suspending hiring efforts.

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President-elect Barack Obama's revelation this past weekend of some of his ideas for fiscal stimulus projects, along with optimism that Detroit auto makers will get a bailout, helped send stocks higher Monday. The Dow rose 298.76 points to 8934, a gain of 3.5 percent. The S&P 500 was up 33 points or 3.8 percent to 909.70.

"It's looked very oversold here for a period of time, but it's hard to tell with sentiment and everything else," said John O'Donoghue, co-head of equities at Cowen. "Today was a better volume day than we've had for awhile. I think we're in very uncharted waters here where this level of government interaction or potential level of government interaction is unheard of."

The stimulus proposals include massive spending on the types of infrastructure projects not seen since the 1950s. In response, construction stocks like Caterpillar and Granite Construction , went flying. Commodities, like gold and energy, also rose. Oil rose 7 percent to $43.71 per barrel. Traders said the moves in commodities was also driven by the decline in the dollar , which was off 1.7 percent against the euro Monday.

The Nov. 20 lows came just before news that President-elect Obama had chosen New York Fed President Tim Geithner to serve as his Treasury secretary. The market, for the most part, has respondend favorably to his series of appointments and promises on the economy.

Econorama

On the calendar for Tuesday are pending home sales at 10 a.m. and the NFIB small business survey at 7:30 a.m. Fed speakers Tuesday include Fed Governor Randall Kroszner, speaking on assessing financial markets instability at 8:30 a.m.; Fed Vice Chairman Donald Kohn on restoring financial intermediation by banks at 11 a.m., and Dallas Fed President Richard Fisher on the financial crisis and economy at 1:45 p.m.

O'Donoghue said it's a sure bet that any economic news now will be dismal. "It's just bloody awful, but quite frequently you never know until you're out of somewhere ...," he said. He also said the market's action has all the signs of a bear market rally.

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"I do think you could get Dow 10,000 and S&P at 1,000 before the end of the year. Markets tend to like round numbers ... But I'm not a big believer in it right now. We've had so many cataclysmic moves both to the up and downside, nothing would shock me," he said.

Patrick Kernan, who trades S&P 500 options, said he sees investors continuing to bet on a very volatile market. "I don't think we're going to see the 700 handle again on the S&Ps, but I think we'll get down to 800 before it's all over," he said.

"It feels a lot better than it did a few weeks ago, but I just think if one large player would decide to start selling, we could be down 50 or 60 tomorrow in the S&Ps," he said.

Kernan, a managing partner at Cardinal Capital, said one of the factors affecting the markets are the lack of players in the futures market. "It doesn't seem right now that it takes that many large players to go one way or the other and move the entire market," he said.

"It still just looks really bumpy. I would feel very comfortable saying we could trade 800 in the S&P. 950 wouldn't shock me at all, but I think we'll trade 800 before we trade a 1,000 again. If we got back down there, I wouldn't be surprised if in a couple days we'd have a very strong rally again," he said.

Questions? Comments? marketinsider@cnbc.com

I am out of the office for this week but I expect to be back on Monday, December 8th with all new posts. See you then.

Questions? Comments? marketinsider@cnbc.com

Last year at this time, we happily said goodbye to 2007 with a naive hopefulness that 2008 would be better. The credit crisis would end, the economy would show its resilience, and stocks, well stocks, were supposed to go up. Instead, the credit crunch worsened, the government rescued (or didn't rescue) a series of financial institutions and stocks hit an 11-year low.

So much for year-end prognostications. It only makes sense to turn up the gloom factor on 2009 predictions, and hope for the best.

Stocks head into December with a tailwind, but the late November rally will quickly be put to the test by some gloomy economic reports and the next phase of efforts to save the struggling U.S. auto industry.

Traders say December couldn't be any worse than the preceding three months where steep declines have left stocks at seriously depressed levels, and they are betting now that December will deliver a rally. A multi-day rally in the past week, the first of note since April, gave the market a boost of confidence.

"There's a lot of people talking about a 20, 30 percent move up in stocks," said Kevin Ferry of Cronus Futures Management. (By Wednesday, the S&P 500 had gained 18 percent in four days and the Dow was up 15.5 percent - its best four day streak since August, 1932.)

December, on average, has been the best performing month for the Dow since 1915. It has averaged gains of 1.4 percent, according to Cleve Rueckert of Birinyi Associates. But Rueckert points out: "We've been careful about making historical comparisons because there really aren't any good ones," he said.

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But Birinyi Associates, in a note, points out that you have to look back to 1937 to see a market performing in a pattern as dismal as this stock market has performed since August, on a month-to-month basis. Stocks also declined in November and December of that year.

On the horizon in the coming week is the December jobs report Friday, expected to show a continuing deterioration in the employment picture. But even before that markets will focus on auto sales for November on Tuesday and the Fed's beige book on the economy Wednesday.

Auto industry executives once more head to Capitol Hill Thursday and Friday for two days of hearings before Senate and House committees on their request for a bailout package. They are expected to be armed with documentation on how they would revamp their companies.

There are also two appearances by Fed Chairman Ben Bernanke. On Monday, he speaks on the economy to the Greater Austin Chamber of Commerce. He speaks on housing and housing finance Thursday at the Presidents' Conference on Homeownership and Mortgage Initiative in Washington.

President-elect Barack Obama, who helped spark the past week's stock rally with his appointment of an economics team, meets with governors in Philadelphia Tuesday.

Investors, will also keep an eye on developments in Mumbai, India , where terrorists killed more than 150 people across India's financial capital starting Wednesday night.

Whither Markets
Brian Rogers, chairman of T. Rowe Price , was in New York this past week for his company's outlook presentation. Rogers, in a brief interview, discussed some of 2008's nasty surprises. "The thing we got wrong was none of us saw the valuation risk in the equity market," he said.

"It wasn't like '99 when everything was expensive. We all underestimated how severe the financial contraction was," he said. Rogers said he personally had also thought that housing could bottom in 2008, but now it looks like the bottom will come in 2009.

"The odds are pretty good that we see the lows in the S&P," he said. He named a few stocks he likes for those dipping back into the market. They include Cooper Industries , the merged Anheuser-Busch Inbev, and oil companies, like British Petroleum or Schlumberger .

For investors looking to buy, he warns to stay clear of consumer staples, a group that had its run as a defensive play. "I think you may want to take more cyclical risk without doing crazy things," he said.

"I think for an individual stock, it's easier to figure a buy price than a sell price," he said. "I think the same can be said for the markets in the aggregate."

Credit Crunch
The government in the past week rescued Citigroup with another $20 billion capital injection and a plan to backstop $300 in assets, plus the Fed pumped up its activity in the mortgage and consumer credit markets with a new $800 billion plan. As the Fed and Treasury turn their big fire hose on the credit markets, there's signs of improvement but also lingering doubts that the improvement is not the sign of a real cure.

By Wednesday, spreads on mortgages narrowed and at the same time, yields on auto loans and credit cards stayed at highs. At the same time, investors rushed into the Treasury market, creating an imbalance that took the yield on the 10-year to a level of less than 3 percent Wednesday for the first time ever.

"They've got to figure out a way to deal with these troubled assets. It's not enough simply to ring fence assets," said Joseph LaVorgna, Deutsche Bank chief U.S. economist. "Everybody is just treating the symptoms and not the root cause."

Ferry said while the Fed was trying to help the markets, there is still something wrong. "If I was the doctor I'm not looking at the stock market to take the patient's temperature. I'm looking at Libor/OIS, and I'm not seeing improvement."

Ferry said the start of December may create some new activity in the markets. "You look to everybody returning to the game in December with a clean trading sheet," he said, noting some major firms were not active as the month of November wound down.

Econorama
There is a full calendar of data in the week ahead, but the Friday jobs number is the highlight.

"November employment is going to look just awful," said LaVorgna. "We're minus 425,000 (non farm payrolls) and the unemployment rate we have at 6.8 percent. We're going up to 8 percent unemployment, probably a lot sooner than I had anticipated."

Other data includes ISM manufacturing data Monday. On Tuesday, auto companies release monthly sales for November, which should show a steep decline. The ADP employment report is Wednesday, as is productivity and costs, ISM non-manufacturing and the Fed's beige book on economic activity. On Thursday weekly jobless claims and factory orders are reported.

By Monday, we should also get a good look at early results for holiday retail sales.

Questions? Comments? marketinsider@cnbc.com

Friday's markets could be subdued after Wednesday's pre-Thanksgiving rally.

Stocks Wednesday rose, with the Dow gaining 247 points or 2.9 percent to 8726. The S&P 500 jumped 30, or 3.5 percent to 887, and the Nasdaq was up 67 points or 4.6 percent at 1532. The gains give the Dow its best four day performance since 1932.

Traders said the multiple days of stock market gains, the longest winning streak since April, was a sign of encouragement. They expect Friday to be a light volume day ahead of the early 1 p.m. close.

For the month of November, the Dow is down 6.4 percent so far, its third straight monthly decline. Its 24 percent three month decline is the worst since 1987 when it fell 31 percent. The Nasdaq is down nearly 11 percent for the month, as of Wednesday, and the S&P 500 was down 8.4 percent.

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Energy stocks were the best performers Wednesday, rising 5.7 percent. The financial sector rose 4.8 percent, giving it a 28 percent gain for the week so far.

Douglas Cliggott, chief investment officer of Dover Management, is one who is not ready to call a bottom for the financial sector. He said he expects to see the government impose a lot of restrictions on the financial companies it has invested billions of dollars in. He said the perimeters of that oversight have not yet been defined.

Cliggott, in an interview after his appearance on "Squawk Box" Wednesday, also said the financials have yet to take their hits from the economic downturn, and he also expects to see a decline in profitability at the firms.

As far as stocks in general, he said he is investing defensively in consumer staples and health care and is taking smaller positions than he has in the past.

"My best guess is we finish the year around where we are now. I don't think the lows are in," he said. "I think the market is very comfortable with the idea that the data flow is going to get worse." He also expects earnings and economic data to look awful in the first half of 2009. "I think the market will trade lower on that."

He said the big question is what the fiscal stimulus package looks like, as it could be a major factor for the economy and stocks.

David Russell, who helps produce "Closing Bell," shared his thoughts on why there's a light at the end of the tunnel for credit markets. Here's his post:

"Banks find themselves with more securities than they’d like," Citigroup CEO Vikram Pandit told Charlie Rose in an interview this week. Now they want to sell them, and "that’s deleveraging," said Pandit.

This was perhaps the most concise thing anyone has said about the financial crisis. Pandit’s company is the largest manufacturer of bonds in the world. He knows the problem didn’t start with falling home prices, or too many houses, but too much debt. Too many bonds are floating around in the global capital markets. This caused the problems on bank balance sheets and between counterparties. After spending the last seven years cranking out $3 trillion of securities linked mainly to home mortgages, Wall Street is now drowning in its own product.

Each phase of the credit crunch has ultimately resulted from this glut of debt. In August 2007, money-market investors got nervous about asset-backed commercial paper and proceeded to unload $372 billion over the next five months, according to the Fed. This ABCP was issued by structured investment vehicles (SIVs), which used the money to buy longer term bonds backed by home mortgages. When these investors refused to roll over the ABCP, the SIVs were forced to sell similar amounts of mortgage bonds. The next thing we knew, prices fell, spreads widened and banks faced writedowns.

Fast forward to September 2008. The CP market was in trouble again as investors worried about Lehman Brothers withdrew more than $400 billion from general money-market accounts, according to AMG Data Services. The fund managers were forced to sell large amounts of short-term bonds to meet the redemptions, pushing yields higher. Many were priced versus Libor, so Libor rose as well, along with the dreaded TED spread.

Again this month, Treasury Secretary Hank Paulson caused a sell-off in commercial mortgage backed securities (CMBS) when he said he wouldn’t buy any "troubled assets" under the TARP. Some investors who had been hoping to sell CMBS to the government immediately put them up for sale. Soon AAA securities traded for 50 cents on the dollar and yielded more than 20%. Shares of life insurers like Metlife and Hartford Financial, big CMBS owners, plunged.

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Each of these disruptions resulted from market forces that put large amounts of bonds up for sale at a time no one wanted them. Until recently, policymakers focused almost entirely on banks, even though their balance sheets were really just ships being tossed about in a much larger storm at sea.

Fortunately, Paulson and Bernanke are shifting focus to the bond market itself. They will provide buy $600 billion of mortgage-backed securities issued by Fannie Mae and Freddie Mac , and provide another $200 billion to aid in the purchase of bonds linked to credit-card payments and auto loans. This caused the largest drop in mortgage rates on record, and suggests we might finally be starting to address the disease rather than just the symptoms.

Questions? Comments? marketinsider@cnbc.com

Stocks may take a break from their high velocity mood swings as traders wind down for the Thanksgiving holiday.

Wednesday's market though will have to digest plenty of data that will help paint a picture of the fourth quarter. October durable goods orders, personal income and consumer spending, all reported at 8:30 a.m., will all be watched carefully for what they say about the current quarter. Weekly jobless claims is also released at 8:30 a.m.; Chicago purchasing managers at 9:45 a.m., and consumer sentiment is issued at 10 a.m.

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"I think the fourth quarter is horrific. The numbers I think are going to be horrible," said Marc Chandler, chief currency strategist for Brown Brothers. "You're going to see consumption fell and income rose slightly. The important thing is spending fell." Chandler said consumer spending is expected to come in at minus 1 percent after a decline of 0.3 percent last month.

Tuesday's market rose early but gave back gains, before recovering again late in the session . The Dow finished up 36 points at 8480, and the S&P 500 was up 5.58 at 857. Stocks got a boost from new government moves aimed at helping markets for consumer credit and mortgage-backed securities.

The Fed Tuesday said it was implementing $800 billion in new programs. The program would provide, starting in February, $200 billion in nonrecourse loans to holders of asset-backed securities, backed by highly rated consumer and small business loans. The Fed also plans to purchase up to $100 billion in GSE debt starting next week, and it will purchase up to $500 billion in mortgage-backed securities backed by GSEs.

Following the announcement, risk premiums on mortgage bonds and debt issued by Fannie Mae and Freddie Mac tightened significantly as buyers returned to the market.

"There's still a lot of details to be had. At the same time, you have to look at it as a real positive," said Greg Peters, Morgan Stanley global head of fixed income research. "They're going after the consumer securitized market. That's something that's needed, and I think it's a good thing. Conceptually, there's a real boost there."

"This week was a pretty big week. You had clarification over the weekend of the guarantee on the financials. You had the latest TARP version 3.0, coupled with the mortgage program. This is an unambiguous positive," he said.

Peters said the market response was positive. "They faded a little throughout the day, but net net, it's much better for sure," he said.

Financials shares rallied on the news, adding another 2.5 percent gain. T. Rowe Price equity analyst Jason Polun follows banks and says we may finally be seeing the banks balance sheets for what they are, after quarter after quarter of negative surprises. Polun was speaking Tuesday at a T. Rowe outlook briefing for the media.

For banks that are lending, the current environment is great. "Traditionally banks take their customers out to lunch. Now customers are taking their bankers out just so they get their loans," he said. He said one area he is keeping an eye on is commercial real estate loans.

Econorama

Besides the data calendar, traders will be watching the announcement of a stimulus package for Europe, expected at 6:15 a.m. New York time. Also, President-elect Barack Obama holds another presser on the economy at 10:45 a.m.

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The European package is expected to equal about 1 percent of Eurozone GDP, or about $122 billion. "This is the nations signing on to it," said Chandler of the announcement.

The dollar Tuesday fell for a second day, losing 1.26 percent against the euro. "Tomorrow the EU is going to make a stimulus announcement. I do think the U.S. is most proactive on this. As the dollar strengthened, we were saying the U.S. was ahead of the curve and getting rewarded for it," Chandler said.

Chandler said the dollar's move lower is a temporary correction. He said the euro may move above the $1.33 level, possibly to a level of $1.36, before it heads lower again. The dollar today was at $1.3067 per euro.

Oil Drill

Oil lost $3.73 per barrel, or 6.84 percent to $50.77. Traders are once more concerned the economy is hurting demand. Inventory data for oil is released at 10:35 a.m. Wednesday.

Questions? Comments? marketinsider@cnbc.com

Stocks will have to battle a rough batch of economic news to pull off a third day of gains Tuesday.

Citigroup chief U.S. equities strategist Tobias Levkovich slashed his year end S&P 500 outlook to 850, just a few points above its current level, and 1000 by year end 2009.

In a note today, Levkovich said the stock market has not responded to what normally might have stopped it from cratering. Even with the TARP, central bank intervention and the end of the presidential election, stocks have been unable to turn around.

His S&P targets had been 1200 and 1300, respectively. He now sees the Dow at 8,300 at year end, from a previous forecast of 10,800, and at 9,500 at year end 2009.

"One of the most frustrating elements of the market when thinking about its inability to generate any meaningful upward momentum...is that sinking feeling that the traditional catalysts for a rally simply have failed to provide the fuel for such gains," he wrote.

Levkovich said the lack of policy clarity from President-elect Barack Obama has been a factor. Stocks are also pricing in a very deep economic downturn and are pricing in further steep declines in earnings.

"We would note that earnings trends are deteriorating in dramatic fashion as evidenced by the plunging annualized decline in forward 12-months earnings outlooks, creating an environment in which stock prices cannot advance," he wrote. Citi expects 2009 earnings per share of $64 for the S&P 500.

He said Citi's forecast calls for a further drop in EPS of 14 percent, which equals a 30 percent plunge in trailing 12-month EPS, peak to trough. "It appears as if the equity market is implying a 50 percent drop at current index price levels, which we consider overdone but understandable," he wrote.

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The "investor mindset" is also being influenced by market technicals, including the S&P's break through the 2002 lows last week. A move to 1,000 by yearend 2009 would be a 33 percent recovery off the recent bottom, "similar to the kind of recovery seen by the end of 2003 vs. the lows of October 2002."

Levkovich said investors will need more evidence of thawing in credit markets and stabilization of business. They may also be lured by the potential for more attractive returns on corporate bonds than on equities. "We must concede that the unpredictable happened and has humbled us all," Levkovich wrote at the conclusion of his note.

• Obama Unveils Economic Team to Deal With Crisis

Questions? Comments? marketinsider@cnbc.com

President-elect Barack Obama's announcement of an economics team Monday may soothe some tensions in financial markets, but investors will keep their eye on the economy, credit crunch and most particularly, Citigroup.

Citigroup management spent the weekend working withregulatorsin an effort to restore confidence in the bank, which has seen its market value plummet as doubts surface in markets about its viability. Citigroup has said it would seek a plan to add capital or find a merger partner but as the weekend winds down, it appears federal officials could throw it a life line by helping backstop it against toxic assets on its balance sheet.

The Dow fell 5.3 percent in the past week but it was rescued from what could have been a more than 10 percent decline by news Friday that New York Fed President Tim Geithner will be named as President-elect Barack Obama's choice for Treasury Secretary Monday. The Dow rallied 6.5 percent on the news, taking it to 8046. The S&P 500 also rallied more than 6 percent Friday, but it was still down 8.4 percent, ending the the week at a round 800.

The Obama Administration is expected to pursue an ambitious stimulus package to jumpstart the faltering economy. In a radio address this weekend, the President-elect said he would direct his economic team to develop a two-year stimulus package aimed at saving or creating 2.5 million jobs.

The Obama economic team is expected to also include former Treasury Secretary Larry Summers as director of the National Economic Council, and New Mexico Gov. Bill Richardson, who will be Commerce Secretary.

"Just about any team that's different from what we have now should help some, because it offers hope of a new and different approach, which almost has to be better than what we have gotten," said James Paulsen, chief investment strategist at Wells Capital Management. Paulsen says he in the camp that does not want to see a lot more government intervention with the financial system.

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It is more important for the new team to show "some calm, confident leadership which reminds everyone less about 'how bad' everything is and more about 'how much has already been implemented and that it will work.' I guess I hope they reflect the 'no drama' Obama personality which I think may help the most," he said.

Econorama

There's lots of data in the week ahead, starting Monday with existing home sales for October. There are actually three key pieces of real estate data in the shortened holiday week. The S&P/Case Shiller home price index is reported at 9 a.m. Tuesday, and new home sales for October are reported at 10 a.m. Wednesday.

"We've got a saloon full of data coming out Tuesday morning. That could be critical," said UBS director of floor operations Art Cashin. He said the market could find a reason to move up if the data is not terrible. "People want to go into Thanksgiving thinking about family, friends and food and things that really matter," he said. The Thursday Thanksgiving holiday is followed by a shortened half day trading session Friday.

On Tuesday, third quarter GDP is reported at 8:30 a.m. Consumer confidence is reported at 10 a.m. that day. Weekly jobless claims are reported Wednesday, as is personal income, durable goods, Chicago purchasing managers and consumer sentiment.

Friday is "black Friday," the traditional launch of the holiday shopping season, which analysts and economists expect to be bleak this year. Retailers sales will be watched for any signs of life. The consumer, hampered by the credit crisis and rising unemployment, has been on a spending strike since mid September.

What's Ahead

In the past week, it became apparent than any progress in the credit markets is a fragile thing. Spreads for all types of instruments widened sharply against Treasuries, a signal to traders that there's still trouble lurking. On Thursday, the flight to safety in Treasuries pushed yields of all durations to record low levels but that action subsided Friday.

Brian Rauscher, director of portfolio strategy at Brown Brothers Harriman, says he sees nothing out there yet to change his bearish view of stocks.

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"I'm still concerned," said Rauscher. He said it might be better to "let the market go further, get the selling out of the way and then we can have an eight month rally. Rip the band aid off."

"At the risk of sounding bearish at the bottom, I keep coming back to the credit markets. I look at what the economy is doing. I look at what analysts are expecting for earnings and all these things are pointing straight down," he said. "Almost everything I look at is still pointed down...(spreads on) anything the central banks are not specifically backstopping, are widening again."

Rauscher said his institutional clients were not getting panicky about the market's behavior. "I talk to clients. I hear what they're telling me. Nobody I speak with is really bullish. But on the other hand, there are few people I've spoken to in the last couple of weeks that are truly bearish. Nobody's telling me: 'Look, I'm scared to hell of this market. I'm on the sidelines, and I'm scared," said Rauscher.

Rauscher said on Friday that the "Geithner" rally did not change his bearish view. In an interview Thursday, he had speculated the market could move higher in Friday's session, and he was right. "The real test is what happens next week," noting that the market has had a hard time staging multi-day rallies.

Questions? Comments? marketinsider@cnbc.com