While the stock market has moved up nicely in the last three months, it's hardly moved stocks above reasonable valuations. IBM (IBM) sells at 12.77 times earnings. Intel (INTC) goes for 11.67 times. Microsoft (MSFT) has a price-to-earnings ratio (P/E) of 11.74. Google (GOOG) sports one of 22.8, but even that isn't too noteworthy when many of these stocks at one time or another traded at 50 to 100 times their earnings. Of course, those were days when there was only up, and everyone was on Ecstasy. Thankfully, every stock, and everyone, is back on earth.

Those relatively benign valuations come from the reality of a slow global economy. In the U.S. it's more like a smashed-into-a-brick-wall economy. No matter the degree of the economic slowdown, all investors are cautious, not willing to bid up stocks when they believe things will only get worse, that profits will only decrease.

The U.S. stock market had its best September since 1939, as reported in the Financial Times. The S&P index gained 8.8%.

If we look around we'll find analysts on both sides of the market now. The market is at a crossroads, sitting right at resistance levels. If we break through this resistance, we could see it go higher.

The bulls are saying that this is the biggest opportunity in decades. The bears are in there selling, looking for a correction. The short index, as a percent of total shares, stands at for the S&P hit 4.61%, the highest since November 2009.

As stocks continue to soar, with the S&P 500 ($INX) at 1,148 at one point during the day and the Dow Jones Industrial Average up around 200 points just today, investors who think the upward trend will continue may want to consider this: There is very little volume behind the market's move.

My colleague Dan Burrows points out in a story published on DailyFinance, that without volume, market action tells you not want people are doing, but what computer trading is doing.

It's usually the big players who move the markets. Right now we are seeing a sizable rally in the stock market. We've had six straight weeks on the upside that have taken the S & P 500 up 28%.

Worldwide, equities have rallied also. The Nikkei is up 25%, Hong Kong 38%, the European index is up 24% and London's FTSE is up 16%. For those who follow major trends, rallies of 20% or more usually signal that a bottom has been reached.

It is difficult to tell whether this rally is fueled by "weak," short-term traders or big players, institutional investors who take longer term positions.

You will always find traders on both sides of this argument. For example, Duncan Neideraur, chief executive of NYSE Euronext, says that this rally is driven by short-term traders. On the other side, State Street, a leading custodian of monies for the big players, says that "institutions are backing this rally." Equity inflows are at their highest levels in 12 years.

In the past week or so, a number of highly-respected investors -- including long-time bears -- have lined up to pronounce the recent stock market rally the real deal.

Now former Morgan Stanley Chief Global Strategist Barton Biggs, who currently manages hedge fund Traxis Partners -- appeared on CNBC's Fast Money to say that he too thinks the current rally will develop into a long-term bull run.

If we learned anything from Tuesday's market, it's that it is spring loaded, pun intended. The Dow Jones Industrial Average was up 379.44 or 5.8%, closing at 6,926.49. The NASDAQ and S&P were up even more. All this on skimpy news from Citigroup Inc. (NYSE: C) that it may have made a profit in the first two months of the year. That was all it took to get the market to pop!

For it's part, Citigroup jumped even more, ending the day at $1.45, for a $0.40, or 38.10% gain. Sending a memo to employees is not a novel approach to getting some stock buzz when anything more could have ended up being a lawsuit for potentially misleading investors somewhere down the road.

With stock market bears calling last week's stock market surge just a dead-cat bounce, it sure seems to me that this cat has nine lives, cause the market seems poised for a Santa-Claus rally. Bears like to point to a credit-crunch, slowing growth, and higher oil-prices as their reason for the stock market to continue dropping. The president of the St. Louis Fed, William Poole, said, " My sense from talking to [local community bankers] is that they do not feel their capital is impaired; they do feel some earnings pressure, everybody is more cautious, but I have no evidence that they are just closing the door to riskier credits."

Along with the lack of a credit crunch, the price of oil was dropping strongly last week until the pipeline explosion that has temporarily sent prices higher. I would fully expect prices to drop back into the mid-$80s in the short to near term. As for the slowing growth argument, with little evidence of inflation and the Fed ready to cut rates if needed, the chance of a recession is virtually zero.

The real risk to to stock prices will come from the banking sector. While analysts are worried about more write downs coming, I think that we will have to have some kind of really big surprise to shock the markets. With news coming out every day of another banking taking a multi-billion dollar charge, investors can hardly be shocked to hear this news. Like I said it would need to be a bank going under or something of that magnitude, in order to bring more fear into the markets and send stocks lower. The market has built in most of the bad news.

With historically low interest rates and little inflation, the climate is ripe for stocks to keep moving higher. Call it a dead-cat bounce if you like. I'll take a 5% move to the upside in just four days any time.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. Author owns stocks and is long the market as of 12/2/07.