No. of Recommendations: 4
Like Mike Shedlock (Mish), John Mauldin and Doug Noland of the Prudent Bear, John Hussman collects and analyzes data that many mainstream analysts miss. These are all very smart people who predicted the 2008 financial crisis years before it happened.

Because of their focus on history, they all missed the bull market that has been supported by unprecedented liquidity injections by the Federal Reserve and the troika in Europe.

Dr. Hussman's latest article shows that the economy is deteriorating. He believes that a new recession started in 3Q2012 (despite the top-line GDP growth of 2.7%).

http://www.hussmanfunds.com/wmc/wmc121203.htm

If Dr. Hussman is correct, the METAR is for a conventional economic recession without a financial crisis. If he is correct, the progression of the stock market requires several predictable steps. First, peaking behavior. Then realization and acceptance. Then, well over a year of squeezing out market participants to form a bottom.

http://research.stlouisfed.org/fred2/series/SP500
http://stockcharts.com/freecharts/gallery.html?$SPX
http://invest.kleinnet.com/bmw1/stats40/%5EGSPC.html

The mungofitch 99-day rule screens genuine tops and bottoms from noise.

Currently, the market is still in a bull phase and has not shown a 99-day top.

If Dr. Hussman is correct and the economy is in recession, the market has not yet recognized it and the bottom would be at least a couple of years away.

Dr. Hussman has consistently criticized the Federal Reserve, stating that their actions have no effect. Whether you agree with the Fed or not, it's obvious that their actions have had enormous effect. Without the Fed as lender of last resort, MZM would have collapsed in 2009 instead of exploding upward in late 2009 and since.

http://research.stlouisfed.org/fred2/series/MZM

The biggest question is whether TPTB can agree whether a recession now would be beneficial for the economy in the long term or whether it should be avoided at any cost. If the answer is that a recession would be the way to go, conservative investors could sell stocks or sell covered calls on the stocks they plan to hold.

Wendy
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