In the past, I’ve referred to negative “real” interest rates (interest rates minus the inflation rate) given the headline inflation numbers and the fact that the Federal Reserve has effectively reduced the Fed funds rate to zero. History shows that negative real interest rates tend to stimulate the economy, as people are encouraged to borrow.

But here again, there’s a time lag. Additionally, with money market funds yielding virtually nothing, participants are taking their money out of such funds and moving it back into higher yielding bank CDs. This is a not-unimportant point, for banks make loans with their deposits, not with their equity. And so there is a time lag.

Then there are the obscure yet far-reaching powers our forefathers granted the Federal Reserve upon its creation in 1913; until Chairman Bernanke, these have rarely been used. This week, we will learn more about such powers, as the Term Asset-Backed Loan Facility (TALF) is expected to get underway, providing a $1 trillion conduit for credit to consumers and small businesses. Again, there has been a time lag between the announced TALF and when it will actually begin to impact the economy.

All of this begs the question: “What if, after the aforementioned time lags, these herculean efforts start impacting the economy all at once, dispelling the belief that this is the worst economy since the Great Depression?” If so, the much envisioned L-shaped recession could look more like a “V,” with a concurrent economic recovery much stronger than most currently believe.

Meanwhile, Friday’s stock market took the shape of an ominous “M” pattern when, after a 130-point Dow dive in the first 5 minutes, the senior index rallied to off 40 points by the end of the first hour, then fell 216 points, only to rally back to a +3 at 3 p.m. Regrettably, it slid again into the closing bell, ending the session down 100.28 points.

Whether Friday’s pattern was due to the options/futures expiration will likely be revealed this week, but I’m hopeful Friday’s fade will constitute a successful retest of the DJIA’s 2002 and 2003 lows clustered around the 7200-7400 level, which is also associated with the 50% retracement rule (a 50% retracement of the DJIA’s rally from its August 1982 low into its October 2007 high equates to roughly 7470 on the DJIA).

More importantly, I find it extremely interesting that the S&P 500 (SPX) never breached its November 2008 lows despite the desultory Dow’s violation of its November 2008 lows. Also worth mentioning: My firm’s proprietary oversold indicator is within 2 points of being as oversold as it was at the November 2008 low.