Is This a Bear Market 'Head Fake' or the Real Deal?

Is this rally for real? Investors are basking in the fourth rally of the current bear market--and this one has yielded the biggest gain for stocks since the markets began to tank in 2007, according to Citi global equity strategists.

In a note to clients today, the analysts looked at a number of factors--including the duration and intensity of the previous market rallies, 'head fakes' in previous bear markets (during the '00-'02 bear market, there were four rallies before the real recovery), as well as factors such as policy response, market sentiment, and earnings data.

Their assessment:

The rally exhibits less of the hallmarks of a head fake. However, we need to be further through the earnings downturn and need to see more good news from the real economy and credit markets before we can suggest this is the real deal...we don’t believe we are through the period of economic downturn. Our economists’ forecasts are for GDP to contract for the rest of the year in most regions. But, their forecasts suggest we could be past the most intense period of the recession. While the economic situation may be less bad, but it is not obviously better.

So essentially, Citi's telling us that we shouldn't get too excited. Yet.