It was quite the party, but it looks like the latest and greatest bear market sucker’s rally may have finally run its course. To be sure, a few days of market weakness don’t necessarily sound the death knell for a 6-1/2 month rally, but on both the technical and fundamental fronts, it appears that months of ominous developments have finally come to a head.

Recently the S&P 500 broke out of its 960-1015 trading range, but the current situation looks rather dismal. As I’ve recently discussed, the lack of upside momentum and the belabored manner in which the market climbed since late August were ominous signals. The market should have surged higher following the breakout above 1015 but instead it struggled higher. As I’m fond of saying, when what should happen doesn’t happen, the opposite becomes likely.

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You’ve heard the talk: Recovery. It’s all the rage in the media these days. Apparently, even while the economy continues to bleed jobs (2.7 million so far, 1 million since the “recession” officially ended) and increasing numbers of unemployed workers give up entirely, we’re in a recovery. Even while retail sales, consumer confidence and wholesale price data all came in worse than expected last week.

Let’s stop and consider what it is that we’re recovering from. After all, did we ever really have a recession? By official measures yes. It ended in late 2001 and was one of the mildest on record. This following the biggest credit expansion, monetary explosion and stock market bubble ever. Apparently the bigger they are the softer they fall! What a lucky break for us all!

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