Recession Myth

The National Bureau of Economic Research (NBER), the official arbiter of such things, will tell us exactly when we entered a recession. The bad news: By the time the bureau informs us, we will have been in recession for several months.
A recession, by one common, shorthand definition, is two consecutive quarters (or more) of declining gross domestic product, adjusted for inflation. By that definition, we're not there now. According to the most recent estimates, GDP grew at an anemic annual rate of 0.6% in the last three months of 2007. But we could still be in recession.
How so? Because the most recent GDP estimate is just that — an estimate. The figures that go into the complex GDP calculation arrive slowly, and they're often revised later. Data from the first quarter of 2008 won't be available in preliminary form until the end of April. In theory, we could already be in recession.
The NBER, a private non-profit group, has a Business Cycle Dating Committee, which has nothing to do with unmarried economists. Its job is to pinpoint when a recession starts and when it ends. You can see the official recession dates at its website: nber.org. (The 1873 recession was a corker.)
It can take a long time for the bureau to declare a recession. It declared the last recession in November 2001 — exactly the month in which, it later determined, the recession had ended.
In most cases, the first half of a recession is dreadful for investors. Corporate earnings drop. So does the stock market. But Wall Street looks ahead, and stocks often rally before the economy picks up. If you've been sitting on the sidelines, waiting for the economy to perk up, here are some indicators you should watch:
1.) •The index of leading economic indicators produced by the Conference Board (conference-board.org). The leading indicators typically go positive about four months before a recession ends.
2.) •Interest rates.The gap between the federal funds rate, a key interbank lending rate, and the 10-year Treasury note yield. In good times, the fed funds rate is lower than the 10-year note yield. The funds rate is now 3%; the 10-year note yields 3.82%. That's a modestly hopeful sign. The indicator, on average, flashes about 11 months before a recession has ended.
3.)•Housing starts. The downturn in housing has led the economic slowdown. A rise in housing starts would indicate a recovery in that sector and possibly an economic recovery. Starts plunged 8.1% in December, the government says.
4.)•Consumer spending. Because Wall Street is worried about the consumer, any signs of life in consumer spending might signal the end of a recession,
Typically, small-company stocks rally first at the end of a recession, because they feel the benefit of lower interest rates first. Technology stocks, industrial stocks and basic-materials stocks also fare well after a recession has ended.
Perhaps the most positive economic indicator for stock investors is the economic research bureau's official announcement that a recession has begun. By the time it's made such an announcement, the recession is typically more than halfway through, and stocks have started to rise again.
Tracking the Dow on Friday,15.02.08.
An excuse for unwinding position for the extended weekend saw the bears skiing through their final laps for the winter holidays.Reports that initial jobless claims and the December trade deficit fell did little to confirm or refute recent Fed arguments the economy is slowing down but will avoid recession.
The Spaniard Bulls were on sight in the last half hour of trading with the Chinese dragonfly helping for a bullish spillover after the holidays.

Light volume rallies typically represent short-term rebounds rather than sustainable moves higher.
Investors weighed Thursday’s Congressional testimony from Bernanke, Treasury Secretary Henry Paulson, and Securities and Exchange Commission Chairman Christopher Cox. The Friday's candlestick fall shy of the weekly main pivot and is willing to hold on to this level for a rebound.