Caterpillar Inc. (CAT) posted fourth-quarter earnings, and boy were they negative. Earnings came in at $1.08 per share compared with expectations of $1.31 per share. CAT also said it will be cutting 20,000 jobs (~11% of their workforce).

A new year is upon us, and with it a new President and many, many new questions for the average investor to ask him or herself or their local MP or Congressman. There are many people out there, politicians not the least of them, that point to the present financial crisis and recession and cry “see THIS is proof that capitalism is the wrong way to go.” I say that's a silly thing to use as evidence.

The volatility is at a record high, and for active traders, that can either be very good or very bad. Of course, for active traders, direction of the markets doesn't matter all that much because you can short stocks, currencies, ETFs, and also exercise calls and puts on options and so on. (actually the calls and puts part is a whole other can of worms altogether because they can be in the money one day, and out the next, thanks to the huge swings) Anyway, what makes the present market situation either very good or very bad what makes volatility such a double-edged sword – it'll make some systems brilliant and others useless. Sometimes technicals and their parameters seem to be the crystal ball everyone wants, and others that worked last week got shaken to bits. (lingo: shaken in and out of positions because of false or too-late signals) And there's no way of knowing ahead of time what parameters will suit the market conditions ahead of time, or what types of technical studies. There, as they say, lies the rub.

Well shut my mouth. The market did tank right after the FOMC announcement, (took them long enough to get it out today) but from positive territory, and bounced back out of negative where it remained at a modest gain until the coolest double top ever formed and in the last ten minutes the markets became negative. What a ride!

Aside from new buyers coming to the market looking to call the bottom and short-sellers covering their positions, there may be another reason why equity markets will be rallying into this month’s end – balanced mutual funds.

A typical balanced mutual fund invests 60% of its assets in bonds and money market instruments, and 40% of its assets in equities. The intention of these funds is to keep the 60/40 split as steady as possible in order to maintain this balanced approach to investing. So as markets move, weightings may become out of whack, requiring the fund to rebalance in order to get back to the original 40/60 weighting. And nearly all do this on a monthly basis… at the end of the month.

For those of you that don't know, a mugpunters would be referring to any little-guy market participants, who get fooled en mass to the benefit of someone bigger and smarter. Ever seen the market drop right before it took off? Attracting sellers, baby.

“Bottoms are a lot better to watch than try to catch.” - I believe that was the lovely Becky Quick of CNBC that said that. I might have the exact wording wrong and welcome a correction. Anyway, a stock market bottom seems to be all anyone really wants to talk about. Today's lesson: picking a market turnaround on a candlestick chart.