I completely agree….

That’s the point — don’t married to a rigid directional bias that could get you killed. There’s something to be said for neutrality at times like this.

I’m cautiously slightly bullish myself, given that I expect a pretty good earnings season. But I have no high expectations for either a huge sustained upswing or a profound crash, and I can see numerous reasons that the gain that I’m expecting may not materialize. The permabear mindset has attracted an online fan base, but I’m not joining that club, either.

There are times when you just need to admit that you just don’t know. Clearly, the bears have missed the boat during the last few months, so I wouldn’t be running to them for guidance on short-term trades. There are occasions when trends are so clear that they are unmistakable for those who are observant, but now there is plenty of ambiguity and room for doubt. I’m inclined to be short long-term treasuries and long on select financials myself, but aside from that, I personally have few strong convictions.

How are we supposed to invest now if we don’t have a directional bias?

I’m of the opinion that falling into the bull vs. bear dichotomy is a mistake. This may be something entirely different, which would defy both camps.

My working theory is that the market deservedly corrected from the absurdly high Dow 14k level, which was a fully levered speculative level. It should have probably ended up somewhere in the 9-10ish range, but then drastically overcorrected and remained overcorrected due to some rather specific news events (Lehman, GM, AIG and Geithner’s unfortunate comments re: the dollar’s reserve status), which coupled with massive deleveraging to create exceptionally high and unwarranted swings. We are currently in the process of fixing this overcorrection, working our way gradually back to the levels where it should have fallen in the first place. Repairing a hole that should have never been dug is a move that is neither bullish nor bearish at its core.

Meanwhile, treasury returns are exceptionally low, commodities have probably been bid up excessively, and real estate remains scary, which leaves equities as one of the better categories left standing. Companies are doing a decent job of turning their unemployment into profits and efficiency gains, and have positioned themselves to be more profitable when customers come back.

All told, that signals to me a market that may run up a bit more from here before going flat, leading to a jobless recovery with sloppy trading and generally low returns on just about everything. In that environment, a few select individual stocks and sectors will beat indexes, and corporate bonds may well be more attractive in many cases than stocks.

There is plenty of room for bad news or for gaming this incorrectly, so caution is warranted, but I would expect some positives earnings surprises and decent numbers to bring a bit of a relief rally. But overall, this is not a time for either strong bullishness or bearishness, so much as it is a return to normalcy.

I’m a little surprised that so many investors are so gullible as to believe and buy such an obvious trick. Hiding losses doesn’t make them go away. Sooner or later some of these big banks will need to be rescued by the government again.

Which is why I’m so sure that this is a bear market rally and not a new bull market. When investors are so easily tricked and deceived. Then the prices they pay for stocks most likely are based on fantasy and not on reality. And reality has a way of making itself known sooner or later.