Numerous analysts have questioned the foundations of the current stock market rally, but the sagging economy hasn't stopped the rally from chugging into its ninth month. On Monday, the market charged out of the gate and held on to a three-digit gain all day.

Though the rally has ground down all who have dared bet against it, there are technical and fundamental reasons to suspect the rally is topping out -- not in a few months, but in a matter of days or weeks.

Please pardon my poor punning, and let me explain: "Fraccing" (rhymes with "cracking") is the oil and natural gas industry's an informal contraction for the technology called hydraulic fracturing, in which water (and in some cases, a chemical mixture) is pumped deep underground to fracture shale and rock and thus free up trapped oil and gas deposits.

The financial media has been buzzing with stories proclaiming a new era for America's natural gas industry as new fraccing technology has enabled the tapping of vast dispersed fields in the Eastern U.S. and the "oil patch" states of Oklahoma and Texas. These advances have caused analysts to raise their estimates of America's natural gas reserves to an astounding 1.8 trillion cubic feet, the equivalent of about 320 billion barrels of oil -- far more than Saudi Arabia's proven reserves of around 260 billion barrels of oil.

A freeze in lending triggers a panic in a Western financial capital which then spreads around the globe, eventually tipping several South American countries into default. In a desperate attempt to stem the panic, the central bank steps in as "the lender of last resort" and unleashes a flood of new money into the palpitating financial system.

Gee, was that 1998, or 2008? Neither -- try 1825 London.

You might think an era of gas lighting, slow sailing ships and horse-drawn carriages has little to teach us about modern finance, but much of what we consider advanced capitalism has been in place since the 1500s: stock markets, portfolio insurance, options, commercial paper and global banking.

Most mainstream academic and government economists -- elites, we should note, who are generally well-protected from the vagaries of the real world -- are united in the view that massive federal deficits to fund stimulus programs are not just a good thing but a necessary thing.

Economist J. Brad DeLong, for example, recently raked a journalist over the coals for suggesting deficits might cause long-term harm to the economy. Accusing the journalist of "not doing the arithmetic," the economics professor at the University of California, Berkeley launched into a questionable string of assumptions to reach the dubious conclusion that massive federal borrowing will add a mere $5 per year to every taxpayers' future tax burden.

Highway robbery has taken on a whole new meaning with local and state governments now jacking up the fines to such an extent that it's leaving people destitute, and in some cases, homeless or even incarcerated.

In California, the cost of a ticket for a broken headlight nearly tripled to $100 this year, according to a report by Fox News. Meanwhile, fines for parking in front of a fire hydrant in Pensacola, Fla. were jacked up 900% to $100.

Local and state governments have long turned to issuing traffic and parking fines as a way of raising more revenue, but doubling or tripling the amount of traffic fines for modest violations seems less like "enforcing the law" and more like a form of extortion aimed at filling the dwindling coffers of local government.

The much-awaited third-quarter gross domestic product number to be released Thursday is expected to show a 3.5 percent increase. In the view of most economists, a positive number will mark the end of the recession which began in late 2008. But a positive print in the GDP is so widely expected that it is now old news, and as a result, the market is primed for a "buy the rumor, sell the news" moment.

Though this increase in GDP is almost universally viewed as "proof the recession is over," the market may not play along. Why? The federal borrow-and-spend stimulus and bank bailout was intended to act like lighter fluid on the real economy's damp logs: contracting credit, declining employment and tax revenues, and a housing market that is still weak.

As reports about record payouts for Wall Street and record deficits trade off on the front page, millions of Americans are wondering what's going on with their economy and their political system. Many of the nearly 200 reader comments made in response to my recent piece, Middle class squeeze: The deep roots of an economic and social transformation, expressed disgust and anger with both Big Finance and Big Government.

At least some of this populist dissatisfaction can be traced back to the 2008 government bailout of big banks, the TARP program. Email and phone calls to congressional offices ran about 300-to-1 against TARP, but Congress approved the massive bailout with very few strings attached. Add in the bailouts extended to other crippled financial institutions such as AIG and Fannie Mae and the government's plans to rework the U.S. health care insurance system, and the sense that the government and the nation's financial elites are failing the citizenry has reached new highs.

Fiserv, a financial information and analysis firm, is forecasting that national median home prices will fall 11.3 percent by summer 2010. The recent surge in home sales and new homes under construction have launched a feeding frenzy in the hardest hit Sunbelt and California markets as investors believe "the bottom is in." The Fiserv forecast -- and the fundamentals of supply and demand -- are throwing cold water on that confident enthusiasm.

Foreclosures are still rising as defaults rise in prime mortgages, which were once viewed as immune to the high defaults hitting subprime loans. As I have reported here before, the foreclosure pipeline -- not just homes that have been foreclosed, but those in default -- is bulging.

The Dow Jones Industrial Average ($INDU) has reclaimed the psychologically important 10,000 level. So is this the first leg of a new bull market? Should we expect the Dow to continue rising, perhaps to its old high above 14,000? Or maybe there will be a sharp snapback that will send the market spiraling down to its March lows of 6,547.

History suggests three basic possibilities (see accompanying chart).

1. A return to a Bull market, similar to the 1990s market after the 1991 recession.

2. A Bear market rally which fizzles out, retesting the recent low and then rising and falling in range-bound trading for years, similar to the 1970s.

3. A Bear market rally which runs out of steam, leading to new lows, akin to the sharp rallies in the early 1930s which led to new lows in the Dow.

The current recession has stoked deep-seated fears about a declining middle class. A great collective anxiety about such a decline has been floating around for years now, and for good reason. As abundant data make clear, middle class families are being squeezed by stagnant incomes and rising expenses, and have been since the 1970s.

This week, Elizabeth Warren, chair of the Congressional Oversight Panel that is monitoring the TARP bailout funds given to banks, jumped into the debate on the topic. In an interview with The Washington Post, she said: "I believe that the middle class is under terrific assault."

An astute political player, she added: "And I don't want to play this as a capitalism issue." Actually, capitalism has quite a bit to do with the squeezing of the middle class -- but so do other factors, including government policy and deep structural changes in the global economy.