Dow is Not Going Up. Dow is Never Going Up.

For several days now, i've been confronted with a disturbing possibility, i.e., that the DOW might presently begin a strong and steady recovery. That notion conflicts with my basic bearish disposition-- my friends over at http://www.topguntrading.net/ have lately taken to calling me mean-spirited names like permabear, deservedly so, i suppose, though i insist that this is not a personality defect of mine, but rather a logic-based predisposition.
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Don't get me wrong-- that forum is by no means a bunch of market pollyannas-- it's pretty much high-class tech and quant traders who know their business. As such, the whole place is mined with tripwires to detect the slightest indication of market movements, and lately more of those indications have been turning up. I've steadfastly managed to ignore most of these signals but the other day i was browsing my copy of Futures Magazine and came across this--
http://www.futuresmag.com/cms/futures/monthly%20issues/Issues/2008/12/Editorial/Markets/Markets-Tech%20talk

And what that is, exactly, is a strange chart and brief discussion of DOW outlook using the CPO (Cycles Project Oscillator), which seems in the past to have been devastatingly accurate. And what it says, exactly, is...
"...The CPO indicates that the stock market decline is ending and the Dow will start a move that should take it up to the 12000 area by mid summer of 2009..."
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So my problem is that i'm a quant, and when i see quantish stuff i'm inclined to pay attention and this one had me absolutely spooked for a couple days. The measure of my annoyance was in exact proportion to my confidence level in reliable quants like this one. Go peek at that chart and you'll understand.
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But, having had a few days to digest it, along with everything else, i'm back to my permabear den. Logically, yes, this quant is true. Logically, yes, my topgun associates' assessments are true when they argue that current and planned massive government capital injections (printing press economics), along with a falling dollar, are going to result in massive inflation and powerful equities runups. Based on historical performance, the CPO chart is true. So, it is all true. So now what's my problem?
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Since you ask, my problem now is that truth isn't always reality. It is true that the thermometer outside my New Mexico home registers a freezing temperature, but it is false to assume that last night's snowfall will survive past lunchtime in the desert sun. It is true that the Titanic can survive virtually anything short of a direct hit from a gigantic glacier, but it is false to assume that it will never find one.
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You see where i'm going with this? Yup. Black Swan theory. Just because you've never seen a black swan doesn't mean there isn't one out there someplace, just waiting for you to meet up with it in the time continuum. And what we have right now is a technical bias to the upside and it's a perfect recipe for a blindside by a black swan. We are believing our charts and one economic fundamental: enhanced money supply produces higher equity prices.
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Now listen to me. What we've got here is a huge pile of explosive crap. But we're sprinkling water on it to prevent sparks. So we religiously believe we've got this thing under control, that all those commercial mortgage credit default swaps, residential prime mortgages about to recast and reset and therefore default and ruin a couple more big banks and wipe out a couple big insurance companies holding the credit default swaps on them, impending credit card defaults, and steadily declining real estate values-- all of that-- is going to be cured by capital injections and fed rate cuts. It therefore cannot explode. And the DOW will therefore go up. Horseradish!!
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Risk is not just a measure of probability, it's the combination of probability+consequence.