Reports showing rail traffic down over 20% brings the sobering reality to light that things in the REAL economy are not well. This is what I'd expect as my view has been that the economy would shrink dramatically over the first couple of years of this meltdown.

However, that does not prevent equity markets from gyrating wildly higher and lower at times as the process of repricing to a new reality works its magic.

The banks, on the other hand, are being made to look as if everything is just fine. As a result the market got new leadership from the financials today to zoom back from the brink of a much more serious decline.

Energy had been leading, and that direction was down as oil turned lower after its latest manic run. But today something happened. Oil decoupled from stocks. Oil went down, stocks went up. What happened?
 
Word got out via analyst Meridith Whitney that Goldman and some other banks will report earnings much higher than any one expects.  Never mind that she pointed out that it was pretty much smoke and mirrors due to accounting changes, and in Goldman's case, due to participating in the "mega" government bond sales. There's also apparently a little accounting trick that has to do with modifying mortgages that are about to default, thereby (temporarily) avoiding those nasty write downs and the need to build reserves to cover the losses. 

So today the financials seized the leadership role again. It is possible that this is the beginning of a blistering run up. Remember that this rally still hasn't retraced the minimum 38% of the overall bear decline, something any counter trend move worth its salt would be expected to do.

Also, the neckline on the H&S pattern in the S&P was not strong enough to turn back the beast, not even once. That got my attention.

So tonight the bulls are back in charge. How long and how far they can carry the ball we'll just have to see.