Major stock averages have retested their 2002 lows, oil hits the 40 dollar mark and the dollar weakens. Does this now mean that it's over? Has the bear market run its course? Is a new bull market on the horizon? Will oil go back to 140? Will the new administration fix everything? Will 2009 bring in more of the glory days?

I want to begin addressing these questions by stating that the primary bearish trend change that occurred in accordance with Dow theory on November 21, 2007 still remains very much intact. Now, this is not to say that there won't be rallies because there will be. In fact, I want to remind everyone about the rally out of the January lows into the May highs. I distinctly remember hearing the talking heads telling everyone then that the bottom was in. In fact, I even saw articles written around this time proclaiming that the Dow theory was actually bullish. But, sure enough there was another shoe to drop as the orthodox principles of Dow theory remained clearly bearish. Then, as the averages moved up out of their July lows I again remember hearing all the reasons that the bottom had finally been made. But, that then lead to the brutal decline into the October bottom and it was at this point that the $700 billion bailout took place to "fix" the worst financial crisis since the 1930's. However, there was still a November surprise in store for the unsuspecting masses as the decline into the November cyclical lows unfolded pretty much right on target. This now leaves us at the fourth "bottom" since January and I'm again hearing all the reasons that THE bottom is now in.

Well, I won't argue the fact that we have A bottom in place. In fact, my cycles work allowed me to anticipate the timing of this bottom ahead of time, and anyone receiving my analysis was well aware of what was occurring and why. However, just as none the previous "bottoms" since January were THE bottom, I see no evidence at this time to say that the November bottom has marked THE bottom or that the bear market is now over. Rather, the now one-year old primary bearish trend that was first established on November 21, 2007 still remains intact and as a result, the Dow theory is still forecasting stormy economic conditions. Here's why. According to Dow theory, once the primary trend is established it is considered to still be in force until something happens to invalidate that trend. To date, nothing of the kind has occurred and I believe, based upon the data at hand today, that there will be continued liquidation in the future as the deflationary forces of K-wave winter continue to bear down.

In the chart below I have included the Industrials and the Transports. As measured from the November 21, 2007 confirmation of the primary bearish trend the Industrials fell by an additional 41% into their recent November 20, 2008 low at 7,552.29. From the divergent October 2007 top, which is where the Dow theory first began to warn of trouble, the Industrials fell by some 46.6%. As for the Transports, they too fell by some 46% from their unconfirmed June 2008 top into their recent November low at 2,945.53. The key now is how long this rally lasts and whether or not anything occurs to invalidate the primary bearish trend. This obviously is an ongoing concern that will have to be evaluated as we move forward, but again, my expectation is that this advance will turn out to be a counter-trend move. The key in monitoring this rally will be the behavior of the intermediate-term Cycle Turn Indicator. As for the new administration being able to "fix" the market, .....please. Don't fall for the propaganda and don't think that one party has more ability to control the market than another. This just is not the case and I want to remind everyone that it is the policy maker's constant interference with the natural forces of the market that has made matters this bad in the first place. What I mean is, had the market been allowed to take its natural course in the wake of the 2000 top, then based upon the normal bull and bear market relationships of the past, we would now be coming out of this mess. Please refer to my last posting here for these details. Anyway, I don't think the bear market is over or that a new bull market has begun and I can virtually assure you that the new administration cannot "fix" the mess we are in. 2009 will not be a return of the glory days and oil is not going back to 140 a barrel at this time. This is a massive/global bear market that has been brought on by credit and excesses of the past. The bottom line is, we are now dealing with K-wave winter and I want to again remind you of the signs that occur in this season.

• "Global Stock Markets Enter Extended Bear Markets"

Given the performance of the Chinese, US, and other stock averages around the world there should be little doubt about this one.

• "Trends During Winter: Stocks Down, Bonds Up, Commodities Down"

I would say that this is occurring.

• "Interest Rates Spike In Early Winter Then Decline Throughout"

In June 2004 the Discount rate was at 2.00%. By June 2006 it was at 6.25% and since August 2007 the Fed has been forced to cut the Discount rate back to 2.25%. So, this too, seems to fit.

• "Economic Growth Slow or Negative During Much of Winter"

I doubt that many will argue that growth is now slow and in many cases negative.

• "Commercial and Residential Real Estate Prices Fall"

This obviously began back in 2006 and is still in a major slump.

• "Bankruptcies Accelerate and High Debt Eliminated by Bankruptcy"

This has obviously begun and is no doubt related to the housing and credit bubbles.

• "Social Upheaval and Society Becomes Negative"

We are only just beginning to see this.

• "Banking System Shaken and New One Introduced"

The banking system is now only beginning to be shaken. There should be much more to come.

• "Free Market System Blamed and Socialist Solutions Offered"

This has not yet happened, but just wait.

• "National Fascist Political Tendencies"

More to come.

• "Debt Level Very Low After Defaults and Bankruptcy"

This has not happened.

• "Trade Conflict Worsen"

This basically has not happened.

• "View of the Future at a Low Ebb"

This has not happened as everyone seems to be looking for the bottom.

• "New Work Ethics Develop Since Jobs are Scarce"

If I can assure you of one thing it is that this has not happened.

• "Greed is Purged from the System"

I can absolutely assure you that this has not happened yet.

• "Real Estate Prices Find Bottom"

This has not happened.

• "There is a Clean Economic Slate to Build On"

Not happened yet.

• "Investors are Very Conservative and Risk Averse"

Again, this has absolutely not occurred.

• "Interest Rates and Prices Bottom"

Not happened.

• "A New Economy Begins to Emerge"

Has not happened

• "Stock Markets Reach Bottom and Begin New Bull Markets"

Again, we aren't there yet and I view any relief rallies from these oversold levels merely as intermission.

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