With a holiday season truly beginning this week, in the midst of an environment with the lowest interest rates in the better part of a half century, and with a whole host of uncertainties that endanger both the infrastructure and the psyche underpinning the American economy, we thought it would be a good time to get some insight into what some of the experts think the big picture really is.

Is this another bear trap rally? Has a new bull market begun, or is it merely a "bull phase" within the secular bear market that has controlled the trends for the last 35 months? Is the economy bouncing off the bottom? Is this the Muddle Through Economy that will do just that, and muddle through? What role is the economy really playing in the direction of the market? These are some of the questions that will frame the perspectives of the experts, and they lead to differing advice as to what to do with your money and how to make money in this market.

A Rundown of Recent Market and Economic Data

Both the market and the economy continue the process of shaking off the hangover from the jubilation of the late '90s. The market has been in a secular down movement for almost three years. At the same time the market has been making its recent move off of the October 9th lows and passing the test of entering a new "bull phase". At the minimum, an 18-20% up move in the indices depending on whom you listen to, the economy has posted some exciting numbers giving investors and business people alike some confidence and optimism.

To wit, the Dow Jones was up 22.5%, the NASDAQ and S&P each posting their own impressive moves of 33.5% and 20.9% from October 9th through Wednesday November 27th. The GDP number for the third quarter was revised up to 4.0% and unemployment numbers unexpectedly dropped again, remaining below the 400,000 level, at which economists say the economy is either growing or contracting. The Purchasing Manager's Index jumped to 54.3 from 45.9 the previous month. A reading above 50 typically reveals growth. Durable goods orders also jumped in October by 2.8% after dropping 4.6% in September. These economic numbers are all lagging indicators, but the Index of Leading Economic Indicators also turned up earlier in November.

The Battle of the Dow Theorists

Dow Theory monitors the movement of the Dow Industrials relative to the Dow Transports according to the most extensive definitions I have found. It seeks to discern primary, secondary and tertiary trends from movements in these indices to provide a buy or a sell signal. However, like all forms of technical analysis, it is employed by several experts with a diverse set of flavors and interpretations of the present market.

Jack Schannep, editor of Schannep's Timing Indicator and whose interpretation of the Dow Theory was used in Edwards and Magee's Technical Analysis of Stock Prices recently proclaimed that "This Time the Bull Market is Official." Schannep reads the charts as indicating a double bottom; the first capitulation on July 19th, and the second on October 9th. Jack would say that it isn't a question of interpretation, but that his proprietary models show a double bottom as clear confirmation. Schannep explains that other Dow Theorists would prefer the pullback, which he sees on November 26th, take a bit longer. He expects the others to follow if the Transports close above 2413.71. As to whether this new move is cyclical or secular, Schannep says the Industrials would have to make a greater than 60% up move to above the all time high to be secular. Whether or not the Industrials cross that mark, Schannep projects a very buyable move right now and would be committing 100% of his money to Spyders (AMEX: SPY ), the S&P tracking security.

Richard Moroney, editor of Dow Theory Forecasts , doesn't comment as specifically on Dow Theory in his letters as Schannep does. But then Moroney also engages in stock picking whereas Jack plays what I like to call the "Schannep Shuffle" between Spyders and Diamonds depending on which he finds more statistically attractive. While his interpretation of Dow Theory sees a controlling bearish trend, he mentions the Intermediate Potential Risk Indicator falling below the level of 30%, a buying level. 30% of what, you ask? Only, 30% of the stocks on the NYSE are above their 200-day moving average, representing a bottom. Moroney is not quite as bullish as Schannep and is recommending a 25% position in money market accounts or short-term bonds.

Moroney's prescription for the defensive posture he recommends are industry leaders and recent Focus List upgrades, Microsoft (NASDAQ: MSFT ), Philip Morris (NYSE: MO ), and Wells Fargo (NYSE: WFC ). With its Justice Department concerns behind it, four quarters of double digit sales growth and an enormous amount of cash, Moroney thinks MSFT is attractive relative to its history. He thinks Wall Street's valuation of MO is unduly low given that the company has an 86% position in Kraft Foods (NYSE: KFT ), valued at $26/share, and thus the tobacco business is trading at 4 times its earnings. Six quarters of double digit REVENUE growth, diversified business and product lines and improving non-performing asset metrics make WFC very attractive to Moroney.

"The GDP Stands Against the Bear"

Adam Oliensis, editor of the Agile Trader , is one of my favorite newsletter editors to read because of the simple and concise language he brings to a broad range of economic and market issues. In his view, the answer is the GDP. He feels that the positive economic data is justifiably driving better-than-expected market performance. He sees GDP growth as distinguishing us from Japan [theirs all but ceased when the Nikkei peaked] and as coinciding with a bottom in the market. Corporate profits are in a meaningful uptrend as a percentage of GDP and he reads the 5 leg of an Elliott Wave into the S&P's recent movement.

Oliensis takes up the debate with some readers who quibble over his reading of the Elliott Wave. Oliensis currently only has two open positions he is recommending to his readers, and he is deftly aware of the uncertainties and threats to the markets. One is a long and the other is a short options play. Yet, for him, there is no imminent threat of economic collapse and is basically a proponent of the Muddle Through scenario, with lots of profit opportunities in the volatility along the way.

"Fear of Deflation All But Guarantees Inflation"

Edmund Bugos is a recent addition with his GoldenBar Report . Ed provides global commodities and currencies advice as well as maintaining coverage on a number of quality gold companies. Bugos' coverage of the dollar and its role in both our economic and monetary policy and the scenarios and ramifications for corporate earnings are too extensive to fit in this short space. Suffice it to say that he thinks the dollar is fundamentally over-valued and has to come down.

Bugos' concern is coming right out of Fed Governor Barnanke and Chairman Greenspan's mouths. The FOMC members have recently mentioned the printing press, the electronic creation of paper money, i.e. debt, as the solution to deflation. Greenspan says the Fed can buy an almost unlimited amount of long term debt to bring long term interest rates down and Barnanke says that the Fed can create aggregate demand through expanding the monetary supply. While they both mention the "virtually zero cost", one has to question what happens with all this new money. The value of all dollar denominated assets drops.

The concern that Bugos has is that a horde of government stimulus through Congressional spending and Fed creation of debt is inflation. Given the prospects for a low growth environment to begin with, the term stagflation comes to mind. [Note: I had been saying it to a few colleagues, not too publicly, though I do have the e-mails to prove it. I recently saw it mentioned at Investor's Insight's free e-letters.]

Bugos plays in markets other than equities, but this picture does add up to a VERY BULLISH scenario for gold. He provides a much more eloquent explanation than I in his November 27th Global Investment Climate update, a 16-page expose on the Fed, the economy, the dollar and the GOLD EQUITIES that are attractive right now.

Tradable Bull Phase