Remember the 200-Day?

It's time to revisit the 200 day moving average, which has fallen back into obscurity after a brief moment of fame in early June.

Something noteworthy is underway: After 393 sessions of declines, it's starting to turn back up again. The 200 day officially broke the losing streak on July 28, only to dip slightly before climbing again this week. The good news is that the early October selloff was now about 200 days ago. Going forward, most of the preceding data points will be lower than the index's latest prints, keeping the average in ascent.

A climbing 200 day confirms the start of a new kind of market. Increasingly portfolio managers will stop worrying about companies going bankrupt and start worrying about missing out on the next move higher. Money is now streaming into the market like water into a tub, splashing equities higher with each successive wave.

This might not be the start of a full-blown bear run, but it's definitely more than just a bear-market rally.

We've also been getting a solidly positive stream of economic data from construction spending to home sales to Chicago PMI. Output has been lagging consumption in sectors such as autos for months. Slower inventory declines will provide positive tailwinds to the economy -- even if consumption remains at lower levels. If the recession truly is over -- as it appears -- stocks remain tremendously under-owned.

While I hesitate to predict too quick of a rally, I suspect the S&P 500 will continue to gain and could even make a stab into the 1,100-1,150 range sooner rather than later.

Other trends feed the positive narrative. In recent sessions, bullish stock and/or options trading has occurred in leveraged companies such as Century Aluminum, Eastman Kodak, MBIA, Hercules Offshore and United Rentals. Last year's panic drove these stocks to the mat as the worst kind of financial and economic calamities were priced in. Now that conditions are improving, these names can rally simply by not going bankrupt. In other words, the credit crunch is going into reverse and will yield triple-digit returns on formerly distressed names. At least that's what happened with telecom and utility stocks after enduring their own credit crunches in 2002.

I also have a sneaking suspicion corporate results will continue to surprise to the upside for the rest of this earnings season and into next. Many CEOs have probably been overly conservative with forecasts because they're waiting to be sure improvements are happening. That could set the stage for a whole new series of positive announcements three months from now. Of course, the market may start to price in such news before it occurs.

One remarkable attribute of the recent strength has been the lack of significant pullbacks. This seems to result at least partially from investors steadily buying puts on broad-market instruments such as the SPY. With protection in place, they have less need for stop-loss sell orders, which in turn seems to be preventing selloffs from gaining momentum.

I am not saying to go rushing into the market at these levels with everything you've got. Like many, I personally hope for some kind of pullback toward 950. Like many, I will probably be disappointed and be forced to settle for buying gingerly during the move higher.

I still have plenty of concerns over the longer run, especially because of the U.S.'s structural unemployment problems and the eventual consequences of lower home prices. I also can't imagine how all this government spending is going to result in anything other than problems. Additionally, if the economic data remains positive, we might start worrying about the Fed raising interest rates.

But those concerns are far into the future. In the meantime, there is money to be made.

Disclaimer:  David Russell owns CENX.

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