In his MarketWatch column, Hulbert looks at a handful of indicators that have accompanied previous market tops, and finds that they aren’t flashing “end of the line” signals. Sentiment, for example, remains far from the bullish levels seen at past tops; monetary conditions are “no worse than neutral”; and valuation conditions are also “no worse than neutral”. Only technical indicators are flashing a warning sign, Hulbert says.

“The bottom line?” Hulbert writes. “Two of the four categories are no worse than neutral, and one is outright bullish. Only one is bearish enough to be consistent with a major market top forming. This discussion doesn’t guarantee that a top hasn’t formed, of course. But, given the weight of the evidence, it would certainly appear as though the better bet is that new bull market highs are still ahead.”

So says Mark Hulbert in a recent Barron’s piece. Hulbert says that over the past 86 years, value stocks (represented by an annually rebalanced portfolio of stocks with the lowest price/book ratios) have outperformed growth stocks (represented by an annually rebalanced portfolio of stocks with the highest price/book ratios) by nearly 4 percentage points per year (citing data from Eugene Fama and Kenneth French). In the past five years through March 30, however, value stocks have lagged growth stocks by nearly 5 percentage points per year. “For that reason,” Hulbert says, “it’s time to expect that the worm will turn and value will re-emerge as the more lucrative investment style.”

Hulbert says that it has been “very rare indeed for value to lag growth for as long as it has recently.” And, he says, “on those few past occasions when value was as big a laggard, it soon produced huge relative returns.” He offers some data from the early 1940s and early 2000s — each of which followed periods when growth outperformed value for several years — as evidence of just how big the snap-back tends to be. “This just goes to show that focusing on the right investment style can be just as important, if not more so, than general stock-market timing,” he writes.

“My review of the historical record found that May over the last couple of decades has actually been one of the stronger months of the calendar,” Hulbert writes. “Its terrible reputation traces to decades longer ago.”

Hulbert says that from the time the Dow Jones Industrial Average was created in 1896 through the end of the 1980s, May was the second-worst month in terms of average performance, with only September being worse. But over the next two decades, May was actually the third-best month in terms of average performance.

Hulbert says there’s a lot of variability in the monthly rankings, and he questions the oft-cited premise behind “sell in May” — i.e., that most big investors and traders head off on summer vacation in May. The hypothesis was given some credence by a study performed by researchers from New Zealand and the Netherlands a decade ago, but, Hulbert notes, “It’s not clear how that applies to the month of May in the U.S. I am not aware of any significant exodus from Wall Street to the Hamptons that occurs in May.”

All in all, Hulbert says that “even if you’re inclined to follow the Sell In May and Go Away seasonal strategy, there is no reason — either statistical or theoretical — to immediately sell once the calendar flips from April to May.”

Citing a study from Ned Davis research, Hulbert says that historically sector performance has been a good indicator of market peaks. “The key is the average performance of the S&P 500’s sectors in the three months prior to past bull market tops,” he writes. “Since the early 1970s, Ned Davis’ researchers found, the two sectors that most often outperformed the market prior to tops were consumer discretionary and consumer staples, while the laggards tended to be financials and utilities.”

Last year, this was the case before the bullish market turned downward. But this year, Hulbert says, it’s a different story, with financials outperforming the market and consumer staples lagging.

“Might the stock market be embarking on a 10% or more correction, just as it did in April of each of the last two years?” Hulbert asks in a new column. “I doubt it. The sentiment data suggest that the correction that began earlier this month is going to be more modest.”

Hulbert points to the Hulbert Stock Newsletter Sentiment Index (HSNSI), which tracks the average recommended stock market exposure among a subset of short-term stock market timers tracked by his Hulbert Financial Digest. The index, which often acts as a contrarian indicator, was at 65.5% when the market peaked two Aprils ago, and 67.2% when the market peaked last year. At the recent market peak on April 2, it was only at 42.1%. This time around, the bullishness also dropped much more quickly after the market peak, falling to just 28.3% just five days later.

“This contrast is significant, according to contrarian analysis, as it suggests that the recent bull market peak was not accompanied by the excessive levels of enthusiasm and euphoria that were seen as the market began its major corrections in each of the two previous Aprils,” Hulbert concludes. He says he still thinks the correction has further to go, but he doesn’t think it will be as steep as the corrections of the past two Aprils.

Stocks are only “slightly expensive relative to their long-term average,” John Campbell, who is the chairman of Harvard’s Economics Department — and who was with Robert Shiller the co-author of a late-1996 paper that warned Federal Reserve officials of a stock market bubble — tells MarketWatch’s Mark Hulbert. Back when they presented their paper to Fed Chairman Alan Greenspan and other Fed officials in the 90s, Campbell and Shiller warned that the cyclically adjusted price/earnings ratio (CAPE ) was nearly 28, among the highest readings in history, Hulbert notes. Now, the CAPE (which uses inflation-adjusted average earnings for the past decade) is high — 21.9 — but still well below where it stood when the Internet bubble ballooned.

And Campbell says there are other factors that are making today’s 21.9 figure better than it may seem. “Campbell added [that] stocks may be justified in being priced at slightly above-average valuations,” Hulbert writes. “That’s because, he said, there appears to be no good alternatives. The bond market, for example, which is the only other asset class that could readily absorb even a portion of the trillions invested in the stock market, is particularly unattractive for long-term investments right now.”

Hulbert also ntoes that the CAPE looks a lot better when compared to more recent averages. “The CAPE has been higher in recent decades than it was in the latter part of the 19th and early part of the 20th centuries,” he says. “And when compared to its average level in these most recent decades, the current CAPE level doesn’t appear to be so out of line. In fact, it is only 12% higher than the average level of the last 50 years, and it is right in line with its average level of the last 30 years.”

“Prior to his retirement in late 2009, Eisenstadt had spent 63 years at [Value Line],” Hulbert notes. “At the time of his retirement, its flagship publication, the Value Line Investment Survey, was in first place for risk-adjusted performance over the three decades the Hulbert Financial Digest had been tracking advisory performance.”

Eisenstadt has continued forecasting the market after his retirement, continuing “to update and refine a complex econometric model that forecasts where the market will be in six months’ time,” Hulbert writes. “The inputs to his model are monthly readings of numerous economic and financial variables over the last six decades — back to 1952, in fact.” Hulbert says that while Eisenstadt’s forecasts have “by no means … always been on target, they have been good enough to justify our paying attention to what his model is forecasting now.”

Fosback, who served as head of the Institute for Econometric Research for three decades, has a “long and eminent a record”, according to MarketWatch’s Mark Hulbert. Hulbert notes that in the latest Fosback’s Fund Forecaster newsletter, Fosback says his econometric model is calling for the stock market to rise by 19% over the next 12 months, and 89% over the next five years — that’s almost 14% annualized.

Fosback’s model uses several indicators that he has found to have predictive value, Hulbert says, and right now Fosback says the major underlying issues that will drive the U.S. market higher are “domestic corporate profits, valuations of domestic stocks, and Federal Reserve policy.” He says corporate profitability is at an all-time high, but market P/E ratios are back where they were in 1990.

As for the European debt crisis, Fosback doesn’t think it will take down U.S. markets, saying all the talk in the media about Europe is little more than “sleight of hand: Look over there … while the real action is right here.”

Hulbert looks at an approach that moves to an all-cash position whenever the CBOE’s Volatility Index (VIX) rises above its median level of just shy of 20, and buys stocks when the VIX falls back below that median level. “The stock market’s average return over the last couple of decades has been higher following below-median VIX levels than above-median levels,” Hulbert writes. “This surprising result held regardless of whether these returns were measured over the following day, week, or month.”

Recently, the VIX — which rose above 20 in late July — has come very close to crossing back below that median level, Hulbert notes. The VIX strategy seems to work because “periods of high volatility tend to be clustered together — an insight that traces to research conducted by Robert Engle III, a finance professor at New York University who received the Nobel Prize in economics in 2003 for his work along these lines,” Hulbert notes. “To the extent the future is like the past, therefore, an investor who goes to cash whenever the VIX spikes upwards will end up forfeiting little return.” That’s hard for most investors to do, however, Hulbert adds, because it means not jumping back into the market even after some explosive upside days.