The stock market doesn’t care what you think (if you’re a bear)

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Halfway through September, the stock market pullback that was widely predicted for this month is a no-show.

Once again, Mr. Market demonstrates that he doesn’t like to be told what to do.

Instead of the 10%-plus decline that many sidelined investors were hoping for, stocks have padded their gains of the spring and summer rally. The Standard & Poor’s 500 index, at 1,052.63 as of Tuesday’s close, was up 3.1% for the month, 16.5% for the year and 55.6% from its 12-year low reached March 9. Stocks are broadly higher again today.

You can sense the exasperation of the bears. They thought they had something going at the turn of the month as the S&P slid 3.5% in the four trading sessions ended Sept. 2.

Since then, however, the index has risen every day but for the 0.1% slip last Friday.

It was a logical call, coming into September, that the market was vulnerable after six straight months of gains. Classic measures of market sentiment were strongly bullish, which often signals at least a short-term top in stock prices.

Other warning signs: Corporate insiders were heavy sellers of their own shares; the Chinese market, which led the global rebound in equities early this year, had tumbled 22% in August; and speculators were running wild in garbage penny stocks such as Fannie Mae and Freddie Mac.

And, of course, there was September’s historical track record as the market’s worst month of the year.

Market bulls, however, expected investors to keep focusing on the economy and whether the evidence supported the idea that a recovery was underway.

The evidence has cooperated: From Aug. 31 to Friday, nearly two-thirds of the 26 major U.S. economic reports released in that period either beat or matched analysts’ expectations, according to Bespoke Investment Group.

The economy may not feel good to many people, but relatively speaking, it looks good to investors who’ve just wanted more signs that the recession has ended. (Cue Billy Crystal in his Fernando Lamas persona of the mid-1980s.)

No wonder, then, that the leading sectors in this month’s stock rally are those whose fortunes ride on prospects for a global economic rebound -- industrial companies, producers of basic materials and energy firms.

Bringing up the rear: financial issues, which have been held back in part as many of the junkiest names (Fannie, Freddie, AIG and Citigroup) have deflated from their August peaks, but without taking the rest of the market with them.

Buyers are finding plenty to like: Rising stocks have outnumbered losers by more than 2 to 1 on the New York Stock Exchange in seven of the last eight sessions.

That encourages bulls like Ned Davis Research, a well-known market research firm in Venice, Fla. that correctly called the rally earlier this year and has maintained the view that stocks are going higher.

‘So much money has been sitting on the sidelines and now is looking for a place to go’ as confidence in a recovery rises, said Tim Hayes, the firm’s chief investment strategist.

Ned Davis believes this is ‘cyclical’ bull market within a longer-term, or ‘secular,’ bear market. But given the firm’s forecast for the S&P 500 to peak sometime in 2010 in the range of 1,200 to 1,300, it makes no sense to sit out the cyclical rebound, Hayes said.

Reluctant investors, he said, will eventually get the pullback they’ve been praying for. ‘We probably will get a decent correction at some point’ in the near future, Hayes said. ‘But we’re not going to try to time that.’

-- Tom Petruno