A New Bull, or a Bear Market Rally?

From the February low to the May close, the S&P 500 rallied 22%. However, in recent RealMoney sentiment polls, the bulls averaged only 25% vs. 75% neutral or bearish. Money-flow services such as Trim Tabs and AMG Data show only modest investments in equity mutual funds: inflows about $2 billion a week since April, about the same amount into bond funds, and $2 trillion sitting in money markets.

If you're a long-term investor, do you remain on the sidelines or do you put your equity allocations back to work?

To answer this question for my clients, I refer to several models of stock market behavior, including the ones we'll discuss in today's column. ...