As hard as it may be to believe, the Dow is withing 200 points of where it was a year ago, and above where it was last August. There is now plenty of talk that the recession may not be very deep, if there is one at all. The Wall Street Journal wrote that job cuts in this downturn could be modest.

The market may be back in rally mode. Part of the euphoria is due to the fact that corporate earnings were not awful. Big companies like Caterpillar (CAT), Microsoft (MSFT), Google (GOOG), Intel (INTC), and Apple (AAPL) did fine. The Fed has cut, just enough. The tight credit markets may be less tight

Even in the face of ugly credit news and rising oil prices, the Dow moved from 12,846 on August 16 of last year to 14,280 on October 9. All that in seven weeks.

If the employment numbers are good over the next month and retail sales for major store chains are not too bad, the Dow may start another ascent toward the summit. It will not be climbing a wall of worry at that point, It will be scaling the ladder of relief.

A sucker rally? Almost certainly. The fact that banks and brokerages are still raising money and hitting the Fed discount window like stick-up men is a clear sign that the financial world thinks it will have to weather more bad quarters. How many months can car sales drop 14%. Oil may be off slightly from its peak, but it still trades at $114. To saps, that looks good.

If the dollar actually starts to recover, hedge funds and wonks and quants will begin to go long the Dow. The Dow will start to go long. But, out on the unemployment lines and at gas stations and bank branches they know the truth better. It is always the guy in the caboose who finds out about the train wreck last.

Douglas A. McIntyre

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