SAN FRANCISCO - A cynic might argue that stocks should have gone even higher today, given the better-than-expected retail sales data and earnings from

Hewlett-Packard

(HWP)

. But days like today demonstrate why what I wrote

earlier this month is true: It's a tough time to be a cynic because, essentially, the market refuses to go down.

Overcoming some midmorning weakness and daylong lethargy, stocks pushed higher in the final two hours of trading, leaving the

Dow Jones Industrial Average

up 0.8%, the

S&P 500

higher by 0.2% and the

Nasdaq Composite

up 0.5%. Also, the Dow Jones Transportation Average rose 2% to 2388.35 and is now up more than 17% since Sept. 20.

"There's a very strong desire to buy the dip, which has been the case since the end of September," said one trader, explaining the market's performance.

Looking beyond the microcosm of today's activity (and into the microcosm of this column), I was struck by the response to

last night's column. By a better than 2-to-1 margin, readers supported my view that caution is appropriate. Maybe I'm preaching to the converted, but the anecdotal evidence suggests skepticism about the rally's staying power remains high.

That being the case, perhaps it's time to look at the other side of the argument and return to a "guru" who has been a steadfast bull in recent months: Don Hays of Hays Advisory Group.

On Monday, Hays compared the market to babies, which appear so fragile at first. Then when you realize that's not necessarily the case and start getting comfortable, they get their first cold "and you are absolutely sure that they are in danger of stopping their breathing," he wrote.

As a new father, these comments certainly hit home. Hays' point, of course, is that a "baby bull market" was born on Sept. 21. "I don't know yet whether this bull will grow to be 6'4" or 5'6," but I'm not too concerned," he wrote. "It is still a healthy baby."

In explaining his view, Hays reiterated a number of indicators that he cited

here on Sept. 26, including signals from the 10-day Arms Index and the 15-day average of the total

put/

call ratio, as well as the steepness of the

yield curve.

As of Monday, he also argued that stocks were 10.9% undervalued based on the I/B/E/S Valuation Model, which compares the earnings yield of the S&P 500 with the current yield of the 10-year Treasury note.

Many observers contend the earnings estimates used in such models are wildly optimistic, thus invalidating such signals. But to Hays, "the psychology, monetary and valuation" components of his market model are "rock solid" in supporting a bullish view. He continues to recommend 100% equity exposure for long-term growth accounts, 85% stocks and 15% bonds for moderate growth, and 65% stocks and 35% bonds for conservative investors.

Technology stocks and financial issues "are the two best places to put your money," Hays wrote today. Medical/health care stocks are currently the biggest overweight in Hays' portfolio but "many of the health care stocks that have been the savior for us during this period might have to rest a while before they move back into leadership." He excluded biotech, which "should continue to act good."

Looking back, Hays compared the environment to September 1982, when the majority of market participants and commentators were skeptical that the Dow's move off its August lows would hold. This was shortly after

Business Week's

"Death of Equities" cover story, he recalled.

"It was very difficult to believe, with the very poor evolving economic conditions of the time, that the market was not going to experience a serious 'retest,' " Hays wrote. "Then in October, as the market once again exploded with very little retest, they said it had already gone too far to buy."

Only months later did it dawn on many investors that "the opportunity to get in while the bull market was in its infancy had escaped them while they waited on a 'retest,' " he concluded. "So for me, the only thing that works is to jump in the water while it's cold."

That's exactly what Hays did when he declared in

late August that he was the most bullish he'd been in five years.

As the markets headed south through late summer and then plummeted after Sept. 11, Hays was the subject of much criticism, and even derision, for that view. Funny, I don't hear much laughter about him now.

Back in August I wrote that if Hays' rally call proved prescient, he'd be named this column's "Guru of the Year." The market's performance from late August through early September seemingly knocked Hays out of the running for that most prestigious award. But if this rally keeps up, he'll certainly merit serious consideration once again.

True Confessions, Part 2

In response to last night's column, Jim, a hedge fund manager in North Jersey (no, not

that

one), writes the following: "Let's face it, the

Fed

and the government

are doing everything in their power to support the market and the economy. Right now the market is simple:

minimal returns in cash versus investing in stocks in, historically, the most seasonally strong period. So in the short-term this market does what every mini- and major bull market does, forces you to play catch-up and totally confound every naysayer."

Jim, who preferred anonymity, neatly summarized many of the same arguments I've made here. While some readers prefer black and white analysis, please don't confuse my long-term caution with short-term bearishness. I've never said "go to cash" or "short the market."

I just (still) believe this is a short-term trading rally -- albeit a powerful one -- rather than the beginning of a new multiyear bull market. My concern is that true "long-term investors" will confuse the two and get burned again, Mr. Hays' compelling baby comparison notwithstanding.