Batten down the hatches

No, not the weather - the stock market. The Dow took a 256-point hit as December's job numbers turned out to be even more awful than what the analysts had been expecting. In just three days of trading this year, the Dow has erased more than half its gains for all of 2007. But what's really scary is that investors don't seem all that concerned. As reported by David Gaffen at MarketBeat, the Chicago Board Options Exchange Volatility Index, which helps measure investor nervousness, is still well below the levels reached in August and November. "That’s a negative — we have to get a washout and get people real nervous before you can put in bottoms," says Ronald Daino, managing director at LY Advisors.

But wait a second - doesn't the market tend to do well in an election year? Well, yes. The average gain in election years going back to 1833 is 6.3 percent, according to the Stock Trader's almanac. Here's the problem: Most elections have either an incumbent or a VP running for office - and they do whatever it takes to shake off the bad economic times. That's why the first and second years of a presidential term are often worse than the third and fourth years. This time out, however, Bush is outta there, Cheney isn't running, and the Republicans don't control Congress. USA Today reports that there's one statistic in the bull's favor - a phenomenon known as the Decennial Cycle. It turns out that the eighth year of a decade is the second-best market year, topped only by fifth year. Too bad there's another historical stat that upends the Decennial Cycle. Only three bull markets since 1942 have posted gains in year No. 6, which is this year. Oy.