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12 Weeks of QE2? :)

There are at least 15 similar points that optimists may use to buttress their own arguments, including a significant rebound in recent weeks in the ECRI leading index. The point is that the stock market can only rally for so long on the prospect that the new Fed is omniscient, caring, and will make everything better. At some point, that actually needs to happen, and the due date for that — mark your calendars — is Jan. 15.

Now the best weapon that the Fed has at its disposal is a rise in the market itself. A swell in stocks would be the cheapest stimulus measure available, as it increases confidence and household net worth, and makes businesses and individuals alike more confident to invest and spend.

And the Fed may get help from politics. Mid-term elections in which control of Congress switches parties, such as 1994, have led to 30% one-year increases in the S&P 500, on average. And since 1900, the Dow Jones Industrial Average (DOW:DJIA) has risen 13% on average, in the third year of presidential terms, rain or shine.

I think equities have more than a fighting chance to shock skeptics and rip higher, with small caps and emerging markets in the lead. Yet the bottom line is that job growth must materially improve not too long after a new round of quantitative easing starts — and the window in which it must occur is a lot shorter than most people recognize.