But then, almost miraculously, buyers began to appear as the S&P 500 sank within hailing distance of the previous Friday's low. Slowly, the blue chip indexes regained their composure. By the end of the session, not only had the S&P tacked on a handsome 4.25%, but the small caps and midcaps had posted even bigger gains.

Technically, this was a very significant reversal—even more significant than the previous Friday's intraday turnaround because this one resulted in a solid finish to the plus side. There will be sharp one-day pullbacks, but I now think the market will trend higher for the next two or three weeks, with volatility gradually subsiding.

How Should You Play It?

If you're an aggressive trader, you might pick up somnefits from the performance of midcap stocks. Don't think of this as a long-term holding, though. We'll probably look to exit in early November once the market'e shares in a mutual fund that bes reflex bounce runs its course.

For the long run, I recommend an especially strong defense company I just added to our Profitable Investing buy list. The stock is selling at a steep discount to its typical valuation of the past give years, and the company carries very little debt. Earnings should hit a new record in 2009, even if the Democrats sweep the upcoming election. (Don't miss: "Three Tips to Survive a Recession.")

We've had several great opportunities to snap up the stock well below our $92 buy limit, which is very important in this market. We don't want to chase any stocks, even our favorites. Chances are, the major indexes will come back down in the second half of November or early December to test last week's lows.
If the test looks promising, we'll buy with both hands. First, however, the market has to prove it can lift out of the current "red zone." I'll be watching and telling my Profitable Investing readers what to do every step of the way.

Get the names of Richard's two newest recommendations immediately when you join Profitable Investing today. Richard E. Band is the newsletter world's #1 authority on investing for low-risk growth. His flagship Total Return Portfolio has more than quadrupled in value since its inception in 1990, and that's while taking far less risk than the popular stock market index funds! Get in on the profits today, and you may even lower your risk in the process. Click here now to get started and take advantage of this special offer!