Stock market rally now has legs that are about four weeks and 40% long!

Last night Asian markets were mixed with China up 2%, India Up 3% and Japan down 1.3% on an announcement of an 8% layoff at Nissan.

At the moment European markets are mixed ranging from, -0.7% to +1.2%

The US market futures indicate a lower opening level with the stimulus package not passed yet and with the Toxic Bank announcement pushed off until tomorrow.

The first Bush Administration solved the 1989 banking crisis and South American bank meltdown by being a little forgiving on capital ratio requirements that then were and now are causing the liquidation of bank assets. Tuesday, this rally should again surge forward with the announcement of a "Toxic bank of America" and a new forbearance towards maintaining bank debt ratios. HIG was down sharply on Friday even as other financials rallied in advance of Geithner's anticipated Tuesday announcement. HIG cut dividends apparently to set aside more capital since they insured the peanut butter manufacturer that sold contaminated product causing the deaths of seven people. It is possible the manufacturer criminally violated laws and HIB will not have to pay anything.

What is a 40% profit given stocks were down about 50% from the high?

A 40% increase from the -50% low puts you still 30% down from the high. That is why a 40% rise in this first rally is not that high an expectation. You could do better but what if you then miss the rally altogether? Typically if you miss the first rally after this significant a decline then you miss half the market rise for the entire year. If you are afraid to buy low then you have no alternative but to buy higher. But if you buy higher and sell high you don’t make much. And worse yet, if you buy higher and we get the sell signal then you lose just like investors lost in late 2007 after we were warning for four months before the 2007 peak.

The S&P market trend channel now shows about a 15% rise is possible to the 1000 level of the channel resistance area. The 200-day moving average resistance level is closer now to 1055 or 20% higher than the S&P closed Friday Feb 7, 2009. So a 40% rise from the December 2008 low is about a 20% rise from where we were Friday. Already the first leg of this first Obama rally is about half over!

People with any human resource knowledge of retirements and layoffs know these reductions tend to be planned for the end of the year for very good business reasons.

First, to entice employees to retire with higher self-esteem, the best time for a corporation is usually October 1 to December 31. October is better if the corporation plans to have a layoff later in the year. Hinting to low performers that a layoff is coming gets greater participation in the retirement package and frightens short-term employees into working harder or looking outside the company for another job. By making retirement a few months earlier the corporation can add all the unused vacation time to the severance pay as well. That vacation was earned the previous year but the retiring employee gets that and the normal severance package all in one fell swoop. They are completely off the books by Dec 31 and earn not more vacation. The employee's income is thus maximized for his last year and that is good for setting social security level and for employee bragging about the good deal! The corporation could care less about the employee's taxes because they are withheld and never actually become spend able income.

Secondly, to layoff employees with minimum expenses corporations want them out the door before they earn next year's vacation rights so they have to be out by December 31. But corporations prefer to hint of layoffs to poorer performers a year or two in advance so that they find a job and leave at their own expense. To maximize corporation profit they try to get the maximum work out of the employee so they vaguely announce the coming layoff early enough so that all employees put in an extra good effort right up to the time the unfortunate few are walked out of the building.

For those two reasons and more, the workforce unemployment/layoff rate rose sharply this December and spiked in January 2009. Therefore the layoff figures will drop sharply in the February 2009 reports but the percent unemployed will continue to rise even as the economy recovers. President Obama's can then declare his imaginary "Bush depression" has been averted and the stock market rally could go on longer. He has to hurry with the stimulation package because if the February reports occur before the package is approved… then Congress will know there was no need for the spending bill in the first place. This whole financial and stock market crisis has been the result of media and Obama's "Great Depression" political campaign propaganda undermining confidence in thee Republicans to win the election.

The Obama enamored media think the tail wags the dog. They say the market went up last week because people think higher unemployment will force Congress to approve the wasteful government-spending package. The opposite is actually true. The Obama administration is trying to get the stimulus package through as fast as possible now because it knows that at this very moment layoffs have dropped sharply. Therefore Obama is more willing to compromise and cut some of the spending which he knows most Americans do not want. Next month when the low layoff numbers are announced the US Pravda media will of course credit the decline in layoffs to corporate confidence in the Obama administration's astounding performance in turning our economy around from the precipice of a Bush depression to a golden era of Obama. Still this Orwellian fantasy could be good news for the market's rally if it lasts that long.