"Gloom is thick enough to cut with a knife," says market historian and seasonal timing expert Sy Harding, whose timing system has just triggered a new intermediate-term buy signal.

Here, in his Street Smart Report, the contrarian explains why he believes we are now near a market low. He also looks at four new index fund positions he has established in his portfolio.

"The slowdown continues. Foreclosures soar. Debt problems are spreading to corporate and credit card loans. The housing collapse continues. The problems are affecting employment.

"And of course the credit crunch continues. Gasoline hit a record high $3.26 a gallon last week. Consumer confidence, and corporate CEO confidence is at multi-years lows regarding the economy.

"The gloom and doom has spread from financial publications to local newspapers and magazines, now featuring stories of layoffs and local plant closings, local small businesses suffering, comparisons to previous bad times, even occasionally to the Great Depression.

"Is the gloom thick enough? Are other conditions in place indicating we are near a market low? Here’s why we think so:

"The Fed could not have made it more clear that it intends to come riding to the rescue any time the
stock market or banking system are threatened. It has also demonstrated that it now realizes the severity of the situation, and is willing to be aggressively innovative in its rescue efforts.

"It has also demonstrated that it now realizes the severity of the situation, and is willing to be aggressively innovative in its rescue efforts. Other government agencies are going at the problems in housing and mortgages. The new safety nets are impressive efforts.

"Meanwhile, the stock market did not take advantage of the pileup of miserable economic news, to fall off the cliff into a bear market when it had the chance. With the relief provided by the aggressively innovative rescue efforts of the last two weeks, it may not have another opportunity for awhile.

"We believe conditions have been set up for a meaningful intermediate-term rally that may well
run into May or June. A typical bottom set-up seems to be in place.

"Consumer sentiment is at a 17 year low, driven by headline news that’s about as gloomy as it gets. Investor sentiment is at extreme bearishness, usually associated with market bottoms. Sideline cash is at a very high level. Money-market accounts are holding $3.4 trillion compared to $2.2 trillion near the 2003 market low.

"Putting it all together, we are on a new buy signal on the U.S. market. We will add the following four holdings to our portfolio:  DJ Transportation Average(NYSE: IYT); the Russell 2000 Index(NYSE: IWM); the Nasdaq 100(NASDAQ: QQQQ); and the S&P 500(ASE: SPY).

"We have chosen holdings of differing risk and volatility. The Transports, which often lead the rest of the market in both directions, topped out in July last year, and did not rally to a new October high with the rest of the market.

"Then, after declining to a mid-January low with the rest of the market, the Transports have been in positive divergence with the rest of the market, rallying back above the 20-day m.a., rather than falling back to a lower low.

"We chose the Russell 2000 because it is more volatile than the rest of the market, falling more in the corrections, but then rallying more in the recoveries.

"We chose the Nasdaq 100 because it has a large component of tech stocks and we believe the tech stocks have less risk and more upside potential if the market is looking ahead to economic recovery. We chose the S&P 500 to give us a holding in the blue chips.

"We expect the up and down volatility will continue on a day to day basis but the trend should be to the upside with higher lows on the pullbacks and higher highs on the rallies."