Just one week into spring and the stock market has sprung into life after spending months circling the drain.

The resurgence seems to have improved the mood slightly – as I’ve found this week at the annual Investment U conference in St. Petersburg, Florida.

Amid beautiful weather and a great facility, the conference is about to wrap up – one that has featured a number of very good speakers. Together, they’ve expounded on their market views, with many bears turning bullish.

Of course, a good number are still pushing gold and other precious metals, while the general sentiment towards government intervention is negative amid the likelihood that its measures will trigger inflation.

And in this market, sentiment is crucial…

Just When You Thought Things Couldn’t Get Any Worse… They Get Better

Investor sentiment is one of the leading indicators of how the market will perform…

The worse the sentiment, the more bullish the market behaves.

It’s a strange relationship, but one that has proved trustworthy time and again. It goes something like this: When it appears that things can’t get much worse, they have to start getting better.

It’s not so much that the numbers get better… just that they stop getting worse at a faster clip. And that’s where we are now.

For example, the data from government, private sources, even corporate America suggests that while the economy isn’t getting better, it’s not deteriorating at an increasing rate.

Just yesterday, Best Buy (NYSE: BBY) commented that it left money on the table by having too little inventory and that its sales forecast for the year was too bearish. Shares jumped by more than 17%.

And what is good for Best Buy is also very good for our Electronic Arts (Nasdaq: ERTS) holding, since the company sells a ton of games at Best Buy locations.

Here’s our take on the market…

When “Don’t Sell” Is Just As Good As “Buy Now”

If we hung our on what the markets did, we wouldn’t stay in business for very long!

While the market is a great indicator of what will happen down the line, we have to try to make money regardless of what it’s doing. And as our most recent picks have shown, we’re executing quite well despite the market’s vagaries.

Many of the attendees here at the conference are scared stiff about what is happening in the markets, with many positioned in cash, not stocks or other investments. But earlier this month, we advised you to do two things…

• Don’t fall victim to the massive volatility.
• Don’t sell at levels that we saw as ridiculous.

Sometimes, getting advice not to sell is just as good as getting advice to buy. As we’ve so often seen in past bear markets, the rally we’ve seen over the past couple of weeks has been fast and furious. Just as advertised.

But to say that we’ve suddenly catapulted into a new bull market would be a big mistake. Markets don’t move in one direction in a nice, neat straight line for very long. So expect significant pullbacks in the coming weeks, in addition to rallies.

Pro Strategies = Profitable Gains

The good news is that we’re better off than we were just a month ago, but not as well off as we were a year ago. But we’ll continue to deploy the strategies that we have faith in – strategies that have produced profits for us multiple times before, regardless of what the market has done.

For example, since Lee Lowell launched his Instant Money Trader put option selling service in the midst of the bear market last autumn, he’s gone and notched up a 100% win rate on his recommendations.

And over at the 1-2-3 Trader, our technical expert Jim Stanton notched up a 100% winner for his readers on Fastenal Company (Nasdaq: FAST) April 2009 $30 calls this past Tuesday, having only held the position for one week.

As for my services, on March 11, we banked 67% on Citigroup (NYSE: C) shares in less than a week in the 400 Report, and took a 14% win on KBR (NYSE: KBR) in Strategic Income earlier this week.

And rest assured, we’ll continue to get you the best, most profitable advice in a timely fashion – no matter what the market is doing.

My colleagues Marc Lichtenfeld and Lee Lowell are here at the conference with me this week, so they’ll return in next week’s edition. But Jim Stanton is still on the tech beat…

Ticker Of The Week: S&P 500 (^GSPC)

Last week, I showed you a chart of the Nasdaq 100, which is probably in the midst of tracing out a longer-term consolidation pattern (trading range), as it hadn’t traded below its November low. That range could be from the November 21 lows up to the January highs, possibly higher.

This week, we’re going to focus on the S&P 500, which has traded below its November lows and bottomed out at 667 points on March 6.

By trading below 670, the index reached an intermediate-term downside price objective and set up a daily buy signal. Earlier this week, that buy signal got triggered, meaning that there is now an 82% chance that the S&P 500 will trace out at least a three-wave Elliott move (possibly increasing to five waves) to the upside. As you can see on the chart below, we’re still in Wave 1.

Although the S&P 500 may move higher over the near-term, keep in mind that the index has risen sharply over the past few weeks and is due for a pullback soon. This would be Wave 2 of a three-wave move.

A normal Fibonacci retracement would come in between 38% and 50% of Wave 1. However, in a very bullish market, it may only pullback 25% to 30% before reversing back up.

Either way, when the current rally runs out of steam (which may have been today), look for the index to see at least four days of price action below the Wave 1 high before new highs are possible.

In Elliot wave terms, if we’re only in a three-wave move up, this would be called an A-B-C rally, which is just a corrective move within the the downtrend.

However, if we’re seeing the start a five-wave rally, the S&P would have to close above the January highs. If you want to play a move at least above the highs of Wave 1, you can buy on the first decent pullback.

Have a pleasant and restful weekend.

Karim Rahemtulla

Top 5 Recent Closed Positions – Mt. Vernon Research Trading Services

COMPANY	SYMBOL/TRADE	BUY DATE	SELL DATE	GAIN	SERVICE
Fastenal Company (FAST)	Bought April 2009 $30 calls (FQA-DF)	3/13/2009	3/24/2009	100%	1-2-3 Trader
SIGA Technologies (SIGA)	Bought shares	10/16/2008	1/30/2009 (first half)	66%	Access
Tenet Healthcare (THC)	Sold January 2010 $5 calls (YTX-AA) Sold January 2009 $7.50 calls (ONZ-AU) – calendar spread	10/8/2007 12/3/2007	1/20/2009	100%	400 Report
Whirlpool (WHR)	Bought February 2009 $45 calls (WHR-BI)	12/31/2008	1/6/2009 (second half)	161%	1-2-3 Trader
Whirlpool (WHR)	Bought February 2009 $45 calls (WHR-BI)	12/31/2008	1/5/2009 (first half)	73%	1-2-3 Trader

Top 5 Recent Closed Positions – Xcelerated Profits Report

COMPANY	SYMBOL/TRADE	BUY DATE	SELL DATE	GAIN
Tesoro (TSO)	TSO shares	11/24/2008	2/17/2009	108%
The Gap Inc (GPS)	Put option sell on March $7.50 puts (GPS-OU)	11/24/2008	1/5/2009	23%
VMware (VMW)	Bought January 2009 $35 puts (MKT-MG)	8/22/2008	10/29/2008	83%
iShares China 25 (FXI)	Bought January 2009 $90 puts (VHF-MR) – part of bear spread	6/25/2007	9/15/2008	50%
December 2008 Gold Futures	Bull call spread on $930/$950 futures options contract	5/23/2008	7/15/2008	36.9%

The Mt. Vernon Research Hall Of Fame

COMPANY	SYMBOL/TRADE	BUY DATE	SELL DATE	GAIN	SERVICE
Chesapeake Energy (CHK)	Bought January 2006 $12.50 calls (WZY-AV) Sold January 2006 $15 calls (WZY-AC) – bull spread trade	7/28/2003 11/6/2003	1/20/2006 1/20/2006	4,900%	400 Report
Interactive Data Corp (IDC)	Bought January 2007 $25 calls (VSW-AE) Sold January 2007 $30 calls (VSW-AF) – bull spread	9/14/2004 12/10/2004	1/17/2006 1/17/2006	4,800%	400 Report
US Airways (LCC)	Bought January 2010 $10 calls (LUL-AB)	6/19/2008	12/22/2008	251%	400 Report
December 2007 Wheat Futures	Call option spread on $9.60/$9.70 futures options contract	9/12/2007	10/16/2007	239%	Triple-Zone Profit Trader
Silver Wheaton (SLW)	Sold December 2007 $12.50 calls (SLW-LV)	7/17/2007	12/21/2007	113%	Strategic Income