I am a chartist in mind - those that know me however also know that I do follow the 'fundies' to some level - I mean, c'mon, dangling a narrative on top of some solid technical analysis is comforting, just like my downward slippers which have been brought out the cupboard already with all the cold Central Oregon mornings lately. That being said, my comment below are seeing recent remarks from Treasury Secretary Paulson:

Normally there are so many comments every day from experts, police officers, you would have to be a linguist or an expert in spotting BS in order to generate sense of that, let alone make transactions from it.

However, Treasury Secretary Paulson nevertheless might not have been more apparent in his recent remarks thus adding some clarity to what has been extravagant and volatile outlooks.

Paulson suggested that the current market turmoil will last longer than the 1998 crisis. There have been government sources indiing that the sub prime drop out will take two years to deal with. Paulson made apparent that the current crisis has very little to do with central banks conducting too tight liquidity requirements.

Thus, the problem of wide credit spreads and dis-functioning money markets will not be solved with the addition of central bank liquidity. Liquidity adds just ease the signs of the crisis.

Therefore think about the equity market rally, constructed on hopes of the Fed taking bold actions by cutting interest rates by 50 bp's following Tuesday, as early. If the market doesn't receive a rate cut, expect weaker equity markets and a solid return to carry trade unwinding - i.e. lower USD/JPY and EUR/JPY.