Is the bear market dead? Or is it just taking a well-deserved break before hunting down its next victim?

Was that it?

Did we just see the bottom, the tipping point, the moment the falling knife hit and stuck?

Last Thursday, the Dow Jones Industrials hit a low of 10,731, bringing its losses over the past nine months to some 23%. Since then, we have seen a modest 5% rebound, accompanied by endless tales from Wall Street and Washington as to how that singular moment marks “the end of the 2008 bear market.”

Done… fini… fait complete.

Dead bear walking.

Back up the truck, mortgage the house (if you can find an agent still in business), cash out the kids’ college funds! Now is the time to buy, buy, buy! Especially the beaten-down Financials! They are diamonds in the mud!

Pardon me a moment, but I just shot coffee out my nose.

I am supposed to buy Citigroup (C:NYSE) now because it “only lost $2.5 billion when it was expected to lose $12 billion”?

Excuuuuuse me?

Once upon a time, a $2.5 billion loss was thought of as a disaster of unmitigated proportions. Suicide watches would be announced for stockholders, while CEOs pondered which suit and tie would look best for their perp walk.

These days, a chief exec who can’t hit the minus $1 trillion mark is a piker, and his stock is supposed to be a bottom-feeding buy.

Seriously, before you dial the phone for your broker or hit send to E-Trade, you ought to take a deep breath and think this through.

Citi didn’t lose another $10 billion this quarter because it’s still sitting on a hoary load of bad paper. That is exactly why I still expect it to lose billions more.

It’s been three quarters since the last time Citibank announced a profit (and even that gain was most probably just “gray” bookkeeping). Even the execs concede that it will be two or three years before the company is profitable again. CEO Vikram Pandit has baldly stated that he expects to flush another $400 billion to $500 billion over the next few years.

Citi is clearly not a growth prospect right now. But guess what: It ain’t a reliable income source either, as its failing loan portfolios are forcing management to take a chainsaw to dividends!

Oh, that’s all the ingredients of a red-hot opportunity, all right… if you are looking for a tax deductions for years to come.

Now you must forgive me for picking on one poor outfit that clearly has a rough row to hoe. Lord knows, Mr. Pandit and his chums in the corner offices at 399 Park Avenue might even have to wait another year before trading in for new Bentleys (which is rough, because the old ones have those ugly stains on the back seat!)

Quite frankly, I am having a very hard time feeling sorry for them… or wrapping my mind around the idea that the financials as a group are any sort of a buy right now.

JP Morgan Chase (JPM:NYSE) is the best of the lot: To date, it has only cut gains in half. Of course it also bought up all of Bear Stearns’ trash, and probably has yet to thoroughly sort through that mess.

Merrill Lynch (MER:NYSE) is in the soup to the tune of $4.89 billion. And now they are playing chicken with the ratings services. Merrill claims that if Moody’s will just let it retain its current rating, lower borrowing costs might allow MER to make a profit this year… or might not.

Moody’s says that another quarter of losses might cost MER its rating… or might not. Sometimes getting a definitive statement out of these Wall Street suits is like nailing a blob of mercury to a board.

800 lb. credit card gorilla Capital One (COF: NYSE) slashed second-quarter profits some 40%. Oh, and its customers are dead-beating them at an ever-increasing rate.

On Thursday, Wells Fargo’s (WFC: NYSE) earnings “beat estimates” for what that’s worth. UBS was so excited by the news that it downgraded WFC Friday morning. The Swiss giant is worried about WFC’s “flexibility.” In plain English: It might not have enough cash to cover a bank run.

Oh yeah: I said bank run, because that’s what we are down to folks, as police turn away angry depositors from IndyMac’s closed doors.

And don’t talk to me about FDIC insurance, either. Anyone who has ever participated in this agonizing, drawn-out process knows that it takes months if not years before you see your money again.

If you are lucky.

Hey, you’re a smart bunch of folks, with common sense to spare. What do you think?

Do you see all this as evidence of a genuine bottom in financial stocks? Or was the recent two-day rise a mild reaction to Wall Street jawboning and Washington rule changes… a mere pause while the bear cleans up and prepares for his next meal?

Now excuse me a moment. I’ve got some coffee to mop up.

Yours truly,

Adam Lass

Senior Editor, WaveStrength Options Weekly

Source: Oh, Ursus. We Barely Knew You