Hartnett comments>> For a sustained equity rally we need:
*Trend reversal of lead indicators of the sell-off & economic downgrades: bond yields & bank stocks

*”Big bang” policy moves: ”morphine” via Fed QE3, ECB rate cut, new EM easing cycle; ”chemo” via credible fiscal restructuring in US/Europe

*Clear capitulation..Case for a trading bounce (scale depends on Fed action): Recession almost priced-in: at 1075 SPX would have priced-in ”normal” recession (1075 = 13-14X multiple + 20% haircut to earnings)

*Oversold: SPX -14% in 11 sessions = 9th largest drop in 11 sessions since 1978: on every occasion sell-off followed by one-month rally (ave 15%)

*Breadth: ”buy” signal from our breadth rule = 41 out of 45 markets in MSCI ACWI now trading below 200dma & 50dma (8 occasions since 2001 this happened global equity rallied 8% next 4 weeks with 7/8 hit ratio)

*Stress: GFSI at 12-month high = pressure on policy makers

*Oil: Big drop in oil price = global tax cut

*China: overnight bounce in China property stocks = growing expectations China tightening over/ease to occur

*Europe: Italian yields down 3 days in row

*Capitulation: it has started; forced selling of 2011 ”winners” (DAX, KOSPI, OMX, HYG, XLI….) & $9bn outflows from equity funds in 2 days