Since the typical recession lasts 18 months, a 6-month economic “turn” from now would jibe with the NBER’s recent revelation that the current downturn began in December 2007 (12 months ago, even though we still haven't experienced 2 negative quarters of GDP).

Moreover, in addition to my firm's oft-mentioned metrics for a better equity market since the October 10th capitulation “low,” the ensuing downside devastation recently left the S&P 500 (at its nadir) a massive 34% below its 200-day moving average (DMA).

Ladies and gentlemen, the last 2 occasions that the S&P 500 exceeded the gap of 25% below its 200-DMA was in October 1974 and October 1987, both of those readings were at major market lows for the indices. Their subsequent advance was more than 50%.

Given all the previous mentioned reasons for my firm's “call” to gradually re-accumulate stocks, in some cases using hedge strategies, we now add Kiplinger’s 6 Reasons to Buy Stocks Now:

1. Stocks are battered and cheap.

2. Stocks are overdue for a rally.

3. The low-risk alternatives are pathetic.

4. It’s not the 1930s.

5. The market shows signs that the worst is over.

6. If not now, when?

Plainly, I agree, and would note that even though the flow of news has become materially worse over the past few months, the DJIA is not much changed from mid-October.

Basically, the major market indices have gone sideways despite the news, including news of fraud and manipulation. Such pricing action suggests participants have capitulated, and that much of the “selling” has already been done. Just as investors were conditioned to believe that any decline wouldn't gather much traction back in 1999 and 2000, they're now being conditioned to believe that any rally isn't sustainable.

Meanwhile, last week the Volatility Index (VIX) closed below its November closing low of 47.73 and the Russell 2000 (RUT) tracked-out above its 50-DMA (at 481.45). If the DJIA (8579.11) can likewise break out above its 50-DMA at 8702, the Dow’s November 4th reaction high becomes the next upside target.

Bettering that high, with a like move from the D-J Transports, would register a Dow Theory buy signal; the first such signal that would come from “cheap” valuation levels in more than a decade.

In conclusion, Dire Straits was playing on the Street of Dreams last week as the Fed lowered interest rates to zero. Indeed, “your money for nothing and your chicks for free!”

Unsurprisingly, given interest rates, the Dollar Index lost 2.8% on the week; yet we think the worst of the dollar’s recent decline is over since the ECB will likely have to lower rates as the European economies sink deeper into recession. Surprisingly, given the dollar’s weakness, crude oil fell a shocking 26.8% last week. Hereto, I'm of the view that oil is bottoming, as these prices should cause China to increase its strategic reserves.

Still, Asian asset classes are the real beneficiary of a falling US dollar and low oil prices, which is why my firm is long the iShares MSCI Japan (EWJ) in the ETF portfolio. And this morning we're adding iShares FTSE China (FXI).

The call for this week: I'm leaving for the nation’s capital, so these will be the only strategy comments for this holiday-shortened week. Nevertheless, as my friends at Bespoke note, “The S&P 500 remains in a short-term uptrend that formed off of its November 20th lows, although it’s walking a tightrope to maintain it.”

Obviously, I agree; and conclude with this quip from the Stock Trader’s Almanac: “Santa Claus comes to Wall Street nearly every year and brings a short, sweet, respectable rally. The rally occurs within the last 5 days of the year and the first 2 in January.” Merry Christmas everybody.