ONE reader wrote to me way back in September to argue that when stock markets staged a rebound before resuming their downward slide, such a phenomenon should be described as a 'bull trap' and not a 'bear trap'.

After all, if an investor is trapped into purchasing into a stock which continues to declines after the initial bullish signal, they are 'trapped' in a bad investment, he wrote.

This is probably the biggest dilemma we encounter as we survey the gains by bourses across the globe over the past few days.

Are we encountering another bull trap where prices are rallying, despite all the awful signals that are spewing out of the United States?

Or is it really a bear trap – prices going up simply because short-sellers have been squeezed to cover back their positions at higher prices due to a sudden surge of buying interest from fund managers window-dressing their portfolio for the traditional end of the year report to their investors ?

No doubt, there is a big tussle between the bulls and bears right now.

Given the thin trading volumes ahead of the Christmas holiday, it doesn't take much of an effort to push up share prices. The converse is true too – it will not take much to send prices on a downward spiral too.

But the sad truth is that the economic fundamentals are souring at an alarming rate, and there seems to be a race among multinationals to rush out bad news before the new year.

For a small bourse such as Singapore, the local corporate fundamentals hardly feature anymore. Stock prices here will move in tandem with the rest of the region, as they react with the latest tantrums out of Wall Street.

The erratic actions made by smart investors seem to suggest that they are unsure what to do next.

Last Friday's US unemployment job data was the worst in decades, yet Wall Street rallied for two straight days, before succumbing to another bout of downswing last night.

US President-elect Barack Obama's promise to spend more to upgrade the creaking infrastructure in the United States was taken as a sign that the next US administration would spend its way out of economic depression.

Even old stories were given a fresh airing. Hong Kong soared on Monday on hopes that Beijing would finally relent on allowing its citizens to invest overseas in the so-called "through-train" programme.

But while the equities market is partying like the worst may be over, the bond market is telling a different story.

In a move smacking of desperation, US investors were willing to pay a penalty to put their cash in government notes: three month US treasury notes now trade at a negative yield, with investors getting back 99 US cents on the dollar, after the notes mature.

Investors just want to park their money and make sure they get it back !

So, those hoping for a strong bear rally before the year comes to a close may be disappointed.

Big surges in price – such as yesterday's 5.7 per cent jump in the benchmark Straits Times Index – may simply melt away as fast, as they have appeared.

Still, there may be some attractions in being a small bourse such as Singapore.

I have been going through the fund flow data kindly furnished by Citigroup each week.

If it is of any consolation to local investors, foreign fund managers seem to have given Singapore the skip altogether.

Despite the wild swings experienced by the STI, there appeared to be little movements of money in or out of funds which invest exclusively in Singapore stocks. Bigger markets such as China and India experience far more violent shifts in fund allocations.

But one thing is clear. Whether we are in a bull-trap or a bear rally, we are clearly not out of the woods yet.

Do comment here with your views or email me at engyeow@sph.com.sg