Is this the beginning of a new bull market? Anything is possible. However, let's examine the situation. With a steep yield curve and low short-term interest rates, it would be very difficult for major banks not to make money on an operating basis in this environment.

This is the same thing that the government did with the banks earlier in the 1990's to address the problems associated with the Savings & Loan crisis. Create an interest rate environment that allows banks to generate profits to repair their balance sheets by writing down damaged assets.

Thus, half of the government's cure seems to be working: operating earnings. We have to look at assets to determine if the other half of the problem can be resolved. The change in mark-to-market accounting does not solve the problem; it only buys time.

We have to answer the following questions to answer the asset problem can be resolved:

• Has housing truly bottomed? There is no concrete evidence here.
• Is there another shoe to drop, like commercial real estate? This seems quite likely.
• Are there signs of a "V" recovery in the near future? Thus far, the rate of economic deterioration has simply slowed with no turnaround in sight.

The quality of bank assets is still quite uncertain. Until there is clarity on the positive resolution of this issue, any stock market recovery based upon these bank earnings is quite unstable.

Japan experienced a similar stock market bounce in the early 1990's, but its banks were eventually forced to write down assets leading to another leg down in the Nikkei. Unless there is a true recovery in the value of bank assets, our banks will eventually be forced to do the same.

Doug Roberts is the Founder and Chief Investment Strategist for ChannelCapitalResearch.com, an independent research firm focusing on investment strategies using the Federal Reserve's impact on the stock prices. He is a corporate speaker, the author of Follow the Fed® to Investment Success and an expert on FreePassers™. He previously held executive positions at Morgan Stanley Group and Sanford C. Bernstein & Co.