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Where's The Floor?

Is there a floor under the market? Stocks this week are acting like there is.

Forget about financials, this is the week when big industrial names are reporting, and as anticipated the guidance is cautious.

From Norfolk Southernto Ryderto Caterpillarto DuponttoUnited Technologies, firms have been noting that global demand has been falling and most do not see an immediate turnaround.

Elsewhere, it's not just stocks moving up on bad news, some companies have had positive comments. JC Penneyused its analyst meeting to raise guidance for the first quarter, now expecting Q1 to be "flat to slightly positive" compared to its previous forecast of a loss of $0.05-$0.10 given just 13 days ago.

Need I add that retailers are among the most heavily shorted stocks on the Street?

So are we at a bottom in the market? Some strategists are turning more positive.

Ned Davis Research, in a note to clients on Monday, noted that on average:

1) the stock market bottoms four months before the economy, and

2) earnings growth troughs one to two months after the economy.

Davis' economic team believes that economic growth could trough at the end of the second quarter or the beginning of the third.

Based on this, Davis sees a strengthened case that the bear market low on March 9 was indeed the low.

Davis has moved to an overweight in equities for the first time in two years. They are overweighting Tech, Financials, Consumer Discretionary, and Materials, and underweighting Telecom, Healthcare, and Consumer Staples.

Cash on the sidelines should make bears very nervous. Dan Wiener will be my guest on the 3 PM show today. Dan is CEO of Advisor Investments and editor of the Independent Advisor for Vanguard Investors.

He notes that cash as a percentage of the market cap of the S&P 500 is now at a record 15 percent.

What does this mean? Historically, it has been a good contrarian indicator. For example, in late 2000, cash levels were very low-about 3 percent. That was the top of the market.

From there, cash levels moved up. The bottom of the market was October 2002, when cash levels neared 8 percent.

It began moving down again, to a little over 5 percent, then began moving up toward the end of 2007, and skyrocketed at the end of the year, and has not really moved below 15 percent.

This is an enormous amount of potential money that could move into the market.

Moving sideways in April is a victory for the bulls; so far the S&P is up 8 percent.

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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