Even after two years of strong gains, analysts see justification for a bull case for stocks that feels almost too good to be true.

The S&P 500 troughed at 676 on March 9, 2009, down 888 points, or 57 percent, from the all time high of 1565 it reached in October, 2007. Investors dumped stocks, ETFs and stock funds, and it's only recently that equities funds have seen any positive inflows.

"I think what's significant is that it's been going on for two years and people still don't think it's real. We're still in the denial stage, and people haven't accepted it yet," said Richard Bernstein of Richard Bernstein Capital Management.

The big risk for the market is rising oil prices, and that is a factor that should not be ignored. But if energy prices do not go sharply higher or stay elevated for long, there is a solid story to tell in record corporate earnings and an economic recovery that sets U.S. stocks up as one of the most attractive investments on the globe, as emerging markets lose their appeal.

The S&P 500

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[.SPX  Loading...      ()   ] has gained more than 93 percent since March, 2009, and 70 percent of that was in its first year. It enters its third year with the tail winds of an improving economy and the first signs of a jobs recovery. February employment data showed an increase of 222,000 private sector jobs, and the weekly jobless claims fell this past week to the best level since May, 2008.

"People need to see these numbers are not fleeting. Then they'll become more accepting of the bull market," said Bernstein.

Two Years is Key

Deutsche Bank U.S. equities strategist Binky Chadha said two years is an important length of time, and historically, it proves to be an important point for investors' memories. "I think it is significant that the market has sustained a rally for two years now. If one thinks about where the economy and markets were in March, 2009 and where sentiment and expectations were, I think it's very significant how far we have come. I would say though that investors have far from forgotten and healing and forgetting are a gradual process," he said.

"Our work on the equity discount rate suggests two years is an important point in investors' memory of volatility and therefore their risk appetite," he said.

David Bianco, Bank of America Merrill Lynch chief U.S. equities strategist, wrote in an email that he too sees the two year time frame as important. "The approximate doubling of the market over the past two years is very significant. While the market hasn't fully recovered, which it usually does in two years, the market double is something I think is fair to describe as a likely once in a lifetime event. Hasn't happened since the Depression," he wrote in a quick email.

"The doubling of the market poses a difficult question for professional asset managers (media too I think). That being, did we fall into an undue pessimism bubble in late 2008 and early '09? Hindsight proved 1999-2000 to be an optimism bubble, 2008-09 may soon seem ... as irrational ... seemingly justifiable at the time, but out of touch with long-term realities," he wrote.

Profit Power

Stocks are up about 5 percent so far this year, with the S&P 500 currently around 1316. Strategists have forecast a year end level for the S&P 500 of 1400 or better, but Chadha sees a case for 1550, based on a higher valuation and more credit for earnings growth.

Standard and Poor's strategist Sam Stovall said the third year of a bull market, however, is historically more sluggish than the first two and even less buoyant than the fourth. "Year three sees total returns of 5 percent for large caps, and 2 percent for small," on average, he said.

Historically, the third year has seen low single digit increases in the index, but by the fourth the market often returns to double digit gains. "Unfortunately, the average individual investor waits out the first two years for the correction to occur. That never occurs. When they do throw the money in, it's usually the year three, just when things do become more dicey," he said.

Stovall expects the S&P 500 to reach 1400 in the next 12 months, and the earnings story is a big part of it.

The fourth quarter earnings period was an important turning point. Not only did earnings beat, but revenue growth became a bigger factor. Analysts upgraded their outlooks for 2011, and now the average earnings estimate for the combined S&P 500 is $96 per share by the fourth quarter. By the third quarter, earnings should be $92.32, surpassing the record $91.47 reached in the second quarter of 2007, according to Stovall.

"We are looking at $96.50 a share. Just a few months ago, we were thinking $90," said Citigroup economist Steve Wieting , in a recent interview.

"Margins are going up right now. They're not always going to go up. Our 2012 earnings estimates are consistent with flat margins," he said recently. Wieting said he expects a gain of 7.3 percent in 2012, taking earnings to $103.50 per share.

The earnings story would be hurt by oil if it rises too much for too long, and some industries could become quickly vulnerable, such as airlines. "That's the one thing that can definitely turn the economic picture around and it can undo the earnings growth story," said Stovall.