It seems all the talking heads and those pretty college cheerleaders on CNBC-TV are telling that now is the time to buy because the market will go much higher. "You can't afford not to be in the market" is the cry. They have lots of reasons that sound good.

The one thing that I hear is that the market is now "fairly valued", even under valued. The S&P500 index has a P/E ratio (that's Price/Earnings) of around 18 to 19 that means it will take 18 years to get back your money based on what the company's stock is earning today. It doesn't take a rocket scientist to realize there are many other places to get a better return. A plain ole bank CD is safer. And, of course, Treasury Bills.

Microsoft is not going to issue any dividend. Instead they are going to buy back huge amounts of their own shares which made the stock advance a dollar on Friday.

Forty percent of the advance in stock prices is due to directional movement of the market as a whole, 40% due to the strength of the sector that it is in and 20% due to the quality of the company itself. You see, just because it is a "good" company does not mean the stock will advance.

Birds of a feather flock together so the "good" company must be in a strong sector that is advancing and then the whole market must be advancing also. When you have all 3 of these things going you have a good chance of making money.

Speaking of sectors and “good” companies have you looked at the home builders stocks lately? I hear the ads about making a fortune in real estate so why have the big home builders stocks declined 50%? Think about this: Those stocks must go up 100% to get back to “even”. Is the real estate bubble busted?

Where are we today? You must step back to take a long view of the market indexes. The price action of the past few weeks cannot be counted as the market trend as a whole. One of the simple market timing methods is the 200-day moving average and for most of the major indexes it is running close to flat. Until that line turns either up or down the market is in no man’s land. It is not a buy or sell signal.

It depends upon who you want to believe, but whatever you do protect your capital with trailing stop-loss orders on your stocks and mental stops for your mutual funds from their highest closing price. Even those with IRAs and 401Ks can move money into a money market account should the market start down again. Is the bear back in his cage? Has the bull market returned?

Time will tell.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know. Copyright 2006 All rights reserved.

Copyright 2006 Albert W. Thomas All rights reserved. Author of "IF IT DOESN'T GO UP, DON'T BUY IT!"