The economy is in a bear market and likely will be for several years to come. Sharp corrections as occurred in the stock market in 1987 shook out the market hard, but losses were quickly recovered and old benchmark highs quickly eclipsed.

That washout was a correction in a bull market with major fundamentals still bullish. That’s not the case today. It will take some time before fundamentals again support new highs. Bear markets do not unfold in one wave. By that I mean that they do not go down and then immediately recover.

Bear markets are complex. They require at least 3 waves to complete. Most don’t know it but the crash of 1929 was followed by a 50 percent retracement of the severe loss in 1930. Then the market proceeded to bleed again until lows in 1932.

Elliot wave technicians counted five waves down in the slide that dropped the DOW from 2008 highs to the March low. They now look for a recovery that if the 50 percent benchmark of 1930 was matched, would allow the DOW to reach 9800. I wouldn’t hold my breath that this recovery will be as good.

World economic and political leaders threw the kitchen sink at stopping the financial crisis and generating a recovery. About the time investors, scared out of markets, regain the confidence to re-enter, the rebound phase will be complete and the next leg of the bear market will begin the process of eating them up again.

Market corrections take the form of three waves, labeled ABC. Corrections in most markets right now following major price losses seen earlier, are to the upside. From the DOW to cotton to soybeans to copper to crude, three-wave corrections are unfolding, many now in their final C-Wave component of recovery.

What we have seen bottom out and a subsequent recovery occur is a temporary respite in the bear market. While the respite can last a few weeks or months longer and stocks extend recoveries further, major corrections should climax soon and “something” will trigger the next wave of declines in the primary bear market.

While commodities have recovered in three-wave corrections, the U.S. dollar has pulled back from the March high in what has so far been a three-wave correction, too. The dollar and commodities have traded inversely from one another.

About the time that the majority begins to celebrate the success of President Obama’s economic generalship, a new war will flare up again. President Obama is juggling lots of kinds of wars from the one with terrorists to the national debt.

China is not as economically invincible as it may seem. The world will be awash with debt. High employment levels will fester before they heal.

Federal Reserve Board member Richard Fisher said, “I envision a slow recovery. Not a V-shaped snapback – nor even a U-shaped one – but a very slow slog as we find a more sensible and sustainable mix between consumption and savings and investment.”

Bull markets have corrections that form ‘V’ or ‘U’ bottoms. This is not a bull market. Bear markets unfold in zigzags with a leg down, an intermediate recovery and then another leg down. While I’m not excited by the prospects, odds favor another leg down yet before the final lasting bottom is set to this bear market. I believe most commodity markets are close to posting intermediate B-wave highs and C-wave declines will follow.

President Obama’s farm budget is an inverse stimulus plan. While he seems to think it’s a jumpstart to push money to new constituencies to support spending and the economy, he wants to take $17 billion away from agriculture over five years.

Agriculture wasn’t hurt as bad by the recession so it becomes a target for Robin Hood’s band of merry thieves. The cuts he’s asking for from agriculture are much less justifiable as waste than most new spending in the President’s economic stimulus package. So what gives?

I think that Congress will ground Obama’s proposed gross sale subsidy limit six feet under. A $500,000 gross sales limit would effectively eliminate subsidies to most commercially viable farmers. Many times in recent years, the only profit was the subsidy, so such a harsh limit would put agriculture in the same financial mess as the rest of the country is in.

What is the point of doing that? Help everyone else, but hurt agriculture? Ag subsidies are better spent, actually a better stimulus. Ironically, China’s stimulus package was far better constructed than ours with money directed to mortar and brick projects that are public investments.

Almost none of Obama’s stimulus package fits that category. Obama doesn’t even fully fund fixing the locks and dams on the Mississippi which has been planned for decades.

Most of Obama’s stimulus is handing out fish while China’s is funding a fleet of new fishing boats. China has been indirectly subsidizing U.S. soybean farmers through its domestic subsidy, grain reserve program.

They have been sucking up soybeans around the world supporting prices for all soybean farmers not just those in China. The U.S. soybean producer arguably was better supported by Beijing than Washington in 2009.

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.