What I was wondering is how often stock market rallies occur in times of falling earnings. As corporate profits continue falling over the next 6 months, I was expecting the stock market to fall too. With the 4-year cycle scenario, the stock market would rally in the face of falling profits. So I’m wondering how often this happens (a stock market rally in the presence of falling corporate earnings), and if you have any time periods for this.

I guess a Fed easing could spark a rally, but how long-lived could that be, considering rising inflation and falling earnings?

I expect corporate earnings to be low for at least a year, and a stock market bottom in early Q1 07, when the recession starts. My plan is to get back into stocks when they are really beat up, early to mid next year.

This whole thing is very interesting. If the market doesn’t rally this fall, would this be the first exception in the history of the market?