6.4%, 7.7% and now 10%. Those are the percentage gains for the Nikkei 225 over the past three sessions. Thursday’s gain was the 4th largest ever. Tokyo rallied along with the rest of Asia, including a record setting 12% surge in South Korea. Headlines emphasize Central Bank rate cuts, expectation of a BoJ cut tomorrow and more pension fund buying, as being the key drivers behind another day of strong upside. No doubt stocks had been severely oversold. Problem is, some equally heavy profit-taking likely looms and aside from pension fund buying, bullishness on rate cuts is a rather weak reason to dive back into equities.

I am more focused on reality (inside/outside of Japan, such as downward revised earnings, job cuts, scaled back capacity, reduced capex, consumer (lack of) confidence, etc) as opposed to more attempts of monetary magic. The argument can and will be made that stocks bottom prior to a bottoming of the economy and I understand that, but I’m not buying the idea that all that much has changed over the past couple days to make it safe to come out and play as freely with stocks that had recently been sold so indiscriminately. I am certainly expecting more volatility and advise bracing oneself for it.