If U.S. equities badly trailed international stock markets over the last ten years then it’s quite possible the opposite might be true over the next several years. This is especially the case if the dollar can stabilize from current levels and continue to mount a modest rally.

Increasingly, it appears U.S. stocks are trying to muster a bear market bottom this summer. Yesterday’s decline, spurred by more credit-related losses at J.P. Morgan Chase (NYSE-JPM) was nevertheless accompanied by a decent rally in credit spreads, which tightened. Also, the Dow and the S&P 500 Index finished well below their session lows; normally, a bad day for banks would result in a much deeper loss for stocks. Gold prices also declined on Tuesday despite a bad session for banks.

Now don’t get me wrong; I’m still super cautious at these levels. The credit squeeze is still in full swing and several indicators continue to point to stress across short-term borrowing rates, CDOs, commercial paper markets and declining loan volumes. But a few developments have occurred over the last few weeks that are undeniably bullish for common stocks.

I’m relieved to see inflationary pressures starting to ease. I’m disappointed to see oil and gold head lower because I’m a bull, but they’ve enjoyed a sizable advance over the last few years and a correction at this point would be a good thing for the global economy. This might be the first year since 2001 that commodities post a calendar year loss. Since early July, all commodity benchmarks have been crushed and are barely ahead for the year-to-date.

Also, the technical picture for stocks in the United States looks much better than foreign markets – many still struggling and actually down in dollar terms since the beginning of July. China, the Mother of all Bubbles before last summer, is now down a blistering 53% in 2008.

Once the credit markets eventually stabilize and the government pours even more money into the battered financial system the stock market will begin to recover. It’s highly likely that the Fed will create another “bubble” as investors and speculators return en masse to boost returns in a low-yielding world. U.S. stocks might be the recipient of the next big rally.

The bull, however, isn’t coming back.

The conditions won’t be in place for a bull market because interest rates are starting from a low base to boost earnings and inflation will remain problematic. Credit stress, a long-term secular event, will also drain corporate finances. But it’s fair to assume a big counter-cyclical bear market rally might ensue, possibly taking the Dow above its October all-time high.

The summer is typically a bad time to buy stocks. Yet, as we approach the fall and progress into the fourth quarter, I think we might see a sizable rally following four straight quarterly declines for stocks. And if the dollar continues to strengthen, the best strategy will be to focus on the S&P 500 Index (large-caps) and S&P 600 Index (small-caps). U.S. stocks will dominate any rally while international bourses trail on the weight of weaker currencies, especially in Europe.