Do stocks really deserve to be up so much?

Market bears and short sellers were slaughtered like sheep this month. The DJIA was up another 100 points to close the month, logging its best three-month run since November 1998.

What is astonishing is how much the Dow is still below its 14,000 peak. With all of the trading energy of the last three months, the market has only made it back to 8,500 which means many traders are still sitting on horrible losses.

Does the market deserve to be up so much? Only if traders still believe that the recession will end well before the end of the year and that the sickening rise in unemployment will either end or slow considerably. If there are any significant signs that the economy is faltering badly again or if joblessness keeps growing by 500,000 or more people per month, the market could give back a great deal of what it has gained.

The other wild card is oil prices. Almost no one would have believed that a shattered economy could push crude back above $65 with OPEC doing little or nothing to cut supply. If businesses and the consumer are facing a spike in energy costs in the fall, the economy may have to climb one more mountain.

Douglas A. McIntyre is an editor at 24/7 Wall St.

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