My sense remains that the GDP numbers will have seen their nadir in the fourth quarter of 2008 - but GDP won’t turn positive until the fourth quarter of 2009. If I’m correct, and if past is prelude, the equity markets will have bottomed the perfunctory 6 months prior to the end of the recession. As history shows, when a recession becomes a fact acknowledged by all, the worst of its effects have already pretty much run their course.

Moreover, an old Chinese proverb suggests, “In the management of affairs, people constantly break down just when they’re nearing a successful issue. If they took as much care at the end as at the beginning, they would not fail in their enterprises.” Plainly, I agree: The time to be cautious was this time last year, not after a 52% decline in the S&P 500.

Indeed, just as participants were told in 1999/2000 that declines wouldn’t gain much traction, participants have now become conditioned to believe rallies won’t gain much traction. I don’t believe it - and I ask investors to consider what could actually go right in 2009.

To be sure, the equity markets are now well off of their respective November lows. Risk appetites are returning. Policy easings have accelerated almost everywhere. The US dollar rally has abated. And China has taken measures to keep its economy from slipping further into the abyss.

Clearly, our equity markets have responded favorably to these events since November. Last week, that response continued, with the DJIA (9034.69) and the D-J Transportation Average (TRAN) closing above their respective December 2008 closing highs.

While this is NOT a Dow Theory “Buy Signal” by my firm’s method of interpreting Dow Theory, it’s a step in the right direction. If, however, the DJIA and the DJTA can close above their respective November 4, 2008 closing highs of 9625.28 and 4071.81, it would render the first Dow Theory “buy signal” from inexpensive valuations in decades.

While I’m hopeful, I remain worried about the trillions of dollars of CDOs/CLOs/etc. coming due this year. Yet for the past few months, the equity market has shown an amazing resilience to bad news, a trait I hope extends in the new year. Ladies and gentlemen, when markets turn a deaf ear to bad news, that’s good news.