Okay, time to dial it back …

We all know what happened yesterday, with the DJIA closing up 936 points. As happy as I was to see it, Morgan Stanley‘s 88% gain in a single day seems almost as irrational as the fears that pushed it down as low as it got.

Early news seems to be indicating that the market should have another up day today in light of the new bank recapitalization plan announced by the Bush Administration.

Today’s Markets – WSJ.com

U.S. stock index futures rose after the previous day’s record-setting rally, as investors cheered the government’s bank-recapitalization plan.

About an hour before the start of trading, Dow Jones Industrial Average futures were higher by nearly 400 points. S&P 500 and Nasdaq 100 futures also gained by a large margin. Futures trading doesn’t always accurately predict early stock market moves after the opening bell.

Monday, stocks snapped a brutal losing streak as the Dow Jones Industrial Average enjoyed its biggest one-day point gain ever following new moves by governments to shore up the global financial system. The Dow leapt 936.42 points, or 11.1%, to 9387.61. The rally ended an eight-day slide in which the blue-chip measure plummeted almost 2,400 points. Meanwhile, the S&P 500 added 104 points and the Nasdaq Composite put on 194 points.

Those gains spurred rallies Tuesday in Asia and Europe. Tokyo’s Nikkei surged 14.2%, its biggest single-day percentage gain. European markets were broadly higher in midday trading, with most major indexes gaining at least 5%.

Even so, I full expect there will be a profit-taking pull-back before the end of the week.

Now, believe me, while I am hoping that yesterday’s action does mark the bottom and the beginning of a turnaround, I don’t think that volatility to going to stop anytime soon. This is a time to carefully weigh your decisions in the market … invest wisely, hedge well, and be prepared for more pain (although hopefully not as deep as it has been the past several weeks). I think things are going to be far too unpredictable for at least the next few months, until well after the election and inauguration, until the new President has a chance to start implementing his economic policies.

Just be prepared for the roller coaster ride …