While the recent turmoil in the credit market is worrisome, the sell off in equities looks like a good opportunity. Granted, home inventories are high and the August number for sales of new and existing homes will be ugly. However, this is all well understood by investors.

What investors seem to be ignoring right now is that U.S. corporations continue to be in excellent shape with lean inventories, strong export demand and very healthy balance sheets. These fundamentals drove a sharp increase in durable orders in July. Furthermore, the index of leading economic indicators was up 0.4% in July.

Lastly, a number of short term indicators I look at (stocks hitting lows versus highs, put/call ratio, bullish versus bearish investors, etc.) are strongly suggestive of a market bottom. Also, insider buying has been robust. Note the attached graph on insider buying. Lastly, Bloomberg put out an article yesterday indicating that stock purchases by executives at banks, consumer lenders and insurers in the Standard & Poor's 500 Index climbed this month to the highest in 12 years.

For there to be a sustained rally I think investors need two things: stabilization in the housing market which I expect to see by year end or early next year; and the availability of credit for prime borrowers. There was legitimate concern in August that even high quality personal borrowers could not get access to debt. It appears that the debt markets have opened up again to these borrowers.

One other factor to consider is the Federal Reserve's action at the upcoming September 18 meeting. I do not think there is a compelling reason for the Fed to cut rates. Inflation is currently in control and, despite investor fears, the economy is on reasonably good footing. A cut here would simply raise the specter of inflation again and do very little to alleviate problems in the housing market. The market is strongly discounting a cut and may be disappointed.

Despite the uncertainty regarding the housing market and future Fed action, economic strength, good valuations and short term indicators suggest that it is time to go shopping for stocks!