The stock market behavior appears set to support a major advance not just another bounce.

Yet the fear gauge, VIX, remains at 48… a high level which prior to 2008 only occurred during short intervals of panic! People are highly hedged and under those conditions the people selling PUTs have a great interest now in reducing volatility, not fear. Cash flow has been low and slightly negative which is not bad. But when the market hovers so close to bottom resistance levels it is at risk of setting off panic selling. The stock market would normally rise during the next two days as options expire this week and the people selling the puts buy shares so the PUTs expire worthless. People who like to channel stocks would say this is the best time to buy into this market.

According to our Re-spiral indicator the market now has less than two weeks left to start a rally or we would normally liquidate our stock holdings in anticipation of another downward leg. The administration yesterday predicted that unemployment would still be under 9% at the end of the year but there would be some contraction in the economy. They have so exaggerated the fall off in retail sales with their -2% per month talk that now their predicted 2% year wide contraction sounds like an improvement. President Reagan saw unemployment peak at 12% after Jimmy Carter's "malaise" and stagflation. Most economists are still predicting the economy will turn around before this year ends.

Bob Brinker said, "We expect calendar year 2009 to be a significant positive year for the stock market."

China bottomed at the end of December and is now up 26%. Last night Asian markets were up with China up 0.8%, India up 0.3% and Japan up 0.3%. Hong Kong was up 0.1%.

At this moment most European markets are flat, up about 0.1% on average.

The US market futures indicate a positive opening this morning. Options expirations will help the market that is ready to surge after several successful tests of the market's recent lows. There is 30% to 40% headroom for this market to rally before hitting an upside resistance level.