I hate to be a wet blanket here, but since nobody else seems willing to do it, I’ll put the task on my shoulders. So, here goes - despite the 22% bounce since March 9th, it’s not like the market is out of the woods yet. We still have some barriers to break through before this is a trust-worthy bull market.

But wasn’t I the guy who was optimistic to the point of saying I felt the bottom had already been made? Yep, that was me. Just keep in mind the end of the bear market isn’t necessarily the beginning of a bull market. But wasn’t I also the guy who was saying the rebound would come without warning, and that most of the early gains would come in the very first days of a new bull market? Yep, that was also me, and I still stand by my words.

So, am I bullish, or bearish? Ha. That’s the $64,000 question.

Actually, I’m more bullish than bearish. And frankly, I do think we’re now at the onset of a new bull market despite several more challenges we’ll have to face through the remainder of 2009. But, corporate profits are being seen again, and the economy’s perking up in terms of comparables. The thing is, I can afford to be that bold - and possibly wrong - because of the way I trade.

Bless their hearts, but all these pundits out there can only think one-dimensionally. The ones who are bearish talk and think as if 100% of your portfolio should be in bearish positions, and that once you decide to be bearish you have to stick with your bearish positions forever. The ones who are bullish talk and think the same way - if you’re bullish, then 100% of your portfolio should be in the market, and you simply can’t sell anything ever again even if the market tanks some more.

Those two extreme stances make it tough/risky to take any side.

Since I phase into trades, and am willing to pull the plug if they’re not working, I can afford to be ‘mostly bullish’. I wouldn’t behave the same if I had to adopt an “all or nothing” approach. I don’t know how anybody can stomach that kind of approach in this kind of environment.

My point? I’m bullish, but not married to the idea. Said another way (as described in this post’s title), while I’m encouraged, I don’t think we need to be giddy yet. Here’s what I’m seeing….

The S&P 500 is back above its 50 day moving average line (purple) again. That’s good, as it shows the bigger, intermediate trend is bullish… at least bullish enough to give the bears a black eye. The thing is, we’ve seen this crossover before, to no avail. The indices crossed above their 50 day averages in early January, and two months later we were hitting multi-year lows. This time could be different, but we really won’t know if it is until the S&P 500 is tested, pulls back to the 50 day average, and then starts to move higher again.

Additionally, on the chart below you can see that the S&P 500 still has to face and beat resistance at 876, where we topped in January and February. Getting above 943 would be very reassuring, but that’s not even on the radar yet.

Needless to say once you look at the chart, a big chunk of the reason things have been so good the last three weeks was that things were so phenomenally bad over the three weeks before that. We really haven’t accomplished anything of significance yet.

So why my sudden increase in bull market chatter? Though the gains and rebound haven’t been significant, there is one difference with this bounce that we haven’t seen with other recent bounces…. breadth and depth. The number of advancers and the volume of those advancers is much more bullish than we saw during prior bounces. This is subtle - almost imperceptible. But, it’s also crucial if a rally is to last.

Bottom line - be bold, but don’t get giddy. I feel we’re due for a short-term pullback bigger than the one we suffered Tuesday, and even bigger than the one we saw in the middle of last week. Maybe we need to pull all the way back to the 50 day average line. As long as we find support afterwards, I’ll continue to add onto my bullish trades. I’m not pouring money into them in the middle of a rally though.

Are you tired of getting bad advice from other media sources that tell you to buy at short-term tops and sell at short-term bottoms? The Small Cap Network newsletter can tell you the right time to buy…. on short-term dips during long-term uptrends. Conversely, we have our pulse on bear trends too, telling you when to short or sell at short-term peaks within long-term downtrends. Nobody else can do this better than we can. Sign up for the newsletter today, and start timing your trades successfully.