A temporary reprieve and a time to sell

The American Federal Reserve's three-quarter-point cut in its key lending rate extended a stock-market rally that began after a pair of investment-banking giants (Goldman Sachs and Lehman Brothers) reported earnings results that, while weaker than a year ago, were free of nasty surprises.  The Dow was up by more than 400 points and the S&P 500 rose 4%.

The Australian, Asian and European markets should rally as well and most likely the euphoria will extend for a few days and perhaps to the end of the week. However, I think this would be a good time to "sell into the rally" rather than look for buying opportunities. The credit crisis is still around and it will take 3-6 months more before all the bad/dirty news is out. Also, a looming threat on the US economy is Inflation. Due to the aggressive interest rate cutting by the Fed, 2% this year alone, inflation is rearing its ugly head again. This could reduce consumer spending power, increase the cost of living and overall be a major impediment to the US economy's recovery.

Professional investors remain wary of calling an end to the Wall Street's credit woes. A series of Fed moves has not eased the crisis, and stocks have remained stubbornly volatile from day to day, never establishing the kind of firm upward trend that generally benefits everyday investors. Until investor fear subsides and optimism returns about the markets (stock and credit) future, we are in for volatile times with a marked downward trend.

Am I being too pessimistic?