In mid-November -- the date to which INC.'s tables are plotted -- there was cause for much popping of corks. For the first time since INC. began publishing its proprietary average and matching it against other popular stock market gauges, all six statistics at last rose above the zero point from which each began in May 1981. In this 18-month famine, the INC. Market Index fell as much as 44% below its starting point -- far and away the worst of the lot. Few investors cared to bid for the young growth stocks -- low-tech as well as high-tech -- that make up INC.'s list, mostly out of fear that such fledglings with their huge development costs and weighty payables would be forced to the brink of Chapter 11. But in that severely recessional interval, in point of reassuring fact, only one INC. company went over the edge. The one entry that did get into trouble -- Flight Transportation -- was removed from over-the-counter trading (and thus from the INC. Index) after becoming enmeshed in various violations of securities law.

Since then, the market has advanced briskly to new high ground, although no one is quite sure why. Generally speaking, money managers reached a mass conclusion that equities were undervalued in the scheme of things, despite interest rate concerns. The only economic circumstance that would warrant even lower stock prices would be if half the country were unemployed.

The buying wave that first swept over large-capitalization blue-chip industrials soon spread to most small-cap growth companies as well. Thus by mid-November, the INC. Index had turned in the steepest recovery of all, rising 50 percentage points in three months, and overtaking the American Stock Exchange (see chart). Both INC. and the ASE include a smattering of oils -- an industry that to date has not participated in the robustness of the rally. Because of the progressively more speculative nature of the advancing stocks, the Hambrecht & Quist Technology Stock Index, composed mainly of small, mostly unseasoned high-tech companies, was able to surge to the fore.

Now the question is not only, Why did stocks rally? (or, to put it another way, Is the recession truly over?), but also, How far can they go if they continue? In order to keep going up, stocks will have to move in tandem with interest rates. The market will learn to live with a prime in the mid-teens and with P/E ratios commonly in the 20s (the median P/E on the O-T-C in November was 12.1, up over 3 points in a year). If, in fact, the 16-year trading zone between DJI 750 and 1,000 has resolved itself dynamically on the upside, there is certainly technical potential for an extended bull market eventually exceeding DJI 3,000. And if the sluggish Dow can triple, then the more volatile fast-growth, higher-P/E issues, many of which already doubled and trebled in the recent rally, can be assumed to have barely started up.