A broad array of market indicators now strongly suggests global equities will stage a massive counter-cyclical rally shortly. If this occurs, use intermittent market strength to reduce your equity exposure as the market eventually hits even newer lows this summer.

Previous stock market rallies since the onset of the credit crisis in August last year have been poor buying opportunities. Stock rallies in September and October and again in late March through May proved fleeting; the U.S. and now, European economies have not bottomed for this cycle and corporate earnings remain too optimistic heading into the second half of 2008.

This morning I’ve included a 12-month chart of the VIX Index, or the CBOE Volatility Index. Of all market indicators I track, this one is probably the most accurate gauge for forecasting market gain or reversals.

The VIX acts like a fear gauge measuring investor sentiment for U.S. blue-chip stocks. The higher the VIX climbs, the more risk-averse investors grow; the opposite is true as stocks rise.

What the VIX is telling us now is that stocks are approaching oversold territory. If this gauge is accurate, then a major counter-trend market reversal lies ahead. Any rally will be further strengthened by short-sellers, now in record numbers on the NYSE and NASDAQ as they scramble to buy back or cover their shorts.

The 52-week high for the VIX – which corresponds with the mid-March Bear Stearns bail-out – was 32.24. That’s just 13% from this morning’s opening level and suggests we’re not far from the point of maximum investor pessimism.

Also, take a look at the above chart. Focus on the lower part of this chart or the MACD (Moving Average Convergence/Divergence). You can enlarge this image by left clicking your mouse on the chart.

The VIX’s MACD is now in-synch with previous intermittent tops in March, January, November and August. This tells me that we’re at the cusp of another intermittent peak for this index.

For stock market investors, 2008 has been extremely painful. The last several weeks have been especially trying as stocks continue to decline almost daily. But if you’re sitting on stocks you’d like to sell and hoping for a brief rally before pressing the “eject” botton, chances are you’ll have that opportunity before August arrives. Beyond that point, this remains a market to sell on strength.