Kass: Encore or Hangover?

This commentary originally appeared on Real Money Pro on Dec. 1 at 7:46 a.m. EST.

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We are seeing the expected responses from the bears and bulls to yesterday's remarkable 500-point DJIA gain.

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The bears cite that liquidity was (temporarily) addressed but not solvency, and though an imminent banking crisis in Europe was averted, the fundamental economic and banking problems remain acute.Banking strains, in particular, were rapidly moving toward a danger point as the wholesale funding mechanism (not deposit-based funding like in the U.S.) in the eurozone remained dangerously exposed to a continued loss in confidence. So the fundamental eurozone problems, bears emphasize, remain very much in place. A lot of heavy (austerity) lifting remains, as does a period of subpar economic growth. The bears remain skeptical of the willingness of the disparate regions to proceed with the heavy lifting. (As an example, Greece is bankrupt, and no dose of dollar liquidity is going to change the inevitability.)The bulls cite that the coordinated policy signifies that all central bankers will stand behind the world's financial system (at all costs) and that the lower rates of dollar swap lines will buy the eurozone time to grow out of its overhang of debt, giving the banks time to raise additional capital and shore up their equity. Bulls say the improving domestic economic releases will trump the economic downturn in Europe and its broader implications.To me, there is little doubt that yesterday's gains were in part fueled by an underinvested hedge fund community coupled with a lot of short-covering.As such, yesterday's sharp advance was probably too much too fast, and if I am forced to give a short-term forecast (gun to my head!), I am of the belief that it would be healthy to have some backing and filling over the week ahead.But, frankly, I don't have a strong conviction, and it's probably not a time to have a decided view in either direction (up or down) over the short term. Quite frankly, it is too much to ask of someone to figure out every up and down move. What I do know is that I am thankful that I benefited from it. For now, the best tactic is probably to graze somewhere between the bulls and the bears -- or to do very little at all.Indeed, I plan to sit on my hands and watch -- for now.Doug Kass writes daily for Real Money Pro, a premium service from TheStreet. For a free trial to Real Money Pro and exclusive access to Mr. Kass's daily trades and market commentary, please click here.

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