The following is part of Pivotal Events that was published for our subscribers Thursday, December 4, 2008

SIGNS OF THE TIMES:

Last Year:

"Luxury is Feeling No Pain"

"Pricey Wares of Burbury, LVMH, Hermes are Flying Off the Shelves"

- Wall Street Journal, October 17, 2007

"Ship Shortage Pushes Up Prices of Raw Materials"

- Wall street Journal, October 22, 2007

In that October the Baltic (BDI) was at 11039. After slumping to 5615 in January it rebounded to the record high of 11793 in June. Yesterday set new lows at 672, which is down 94%.

This Year:

"Metal Prices Fall Further Than During The Great Depression"

- Telegraph, December 2, 2008

"Salaried lawyers at top New York firms will get bonuses amounting to only a quarter of last year's."

- Bloomberg, November 26, 2008

Actually, there has been a night and day change in conventional wisdom since the confidence of last October-November. Today's shock and dismay is setting up the rebound rally that has been possible from the November low until around March-April.

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Stock Markets: As we have been noting, sentiment has been devastated and dynamics have registered significant Downside Capitulation readings on our proprietary model. That is on the senior stock indexes as well as on commodities (CRB). Going the other way, there was a timely Upside Exhaustion reading on the Dollar Index. Not yet going the other way, we have yet to get the full Upside Exhaustion reading on the long bond.

The action since the November 20 low has been tentative, but seems to be recovering in price at the right time. The last high was DJIA 8831 last week and getting above this would break the overhead "ice". It could take well into January before the horrors of the crash are eclipsed by comfortably new recovery highs.

We have been describing the expected move out to spring as a tradable rally for investors and traders. It could carry most, if not all, sectors with it.

The attached study* updates the classic fall crash pattern. The fit has been remarkable.

(*Study may be found at www.institutionaladvisors.com)