So Many Analogies

Every time the U.S. employment rate has risen by at least 0.3% in a month, as it did in December, a recession has occurred.

Prior to the onset of a recession, there's typically at least a 25% one-year rise in weekly unemployment claims. The increase in claims in December was less than 7%.

The average decline in the S&P 500 from a pre-recession peak to a trough since 1945 has been 25%, just a few percent more than the index has lost from the 2007 peak to its intraday low last Wednesday. So maybe the market has already discounted a recession?

Every one of the 23 times since 1987 that the weekly AAII poll has shown bears over bulls by a 2 to 1 ratio, the market was up 12 months later, by an average of 21%.

So, where does that leave us? We have conflicting signals. The positive is that since the one day reversal last week and the 600 point swing on the Dow, we have been moving higher. Most pundits talk of the recovery as short covering, a bear market bounce, nothing to get excited about. This is classic wall of worry stuff. Even capitalist-minded IBD (Investors Business Daily) can't even come out and say that they are watching for a follow through rally, and that today would have been Day #5 of a rally attempt. If IBD is skeptical, that tells us something.

Good Luck.